Before you plunge into a real estate sector and expand your investment portfolio, it is imperative to cautiously understand the market scenario and the risk associated.
Over the last 12 months, the real estate market has severely suffered at the hands of Demonetisation, Real Estate (Regulation and Development) Act 2016, Goods and Services Tax (GST). There are reports about the large unsold inventory of real estate apartments. Although, developers have come out with luring schemes and discounts such as subvention, GST Free, Stamp Duty Free and No floor Rise, the buying sentiment remained subdued, probably because homebuyers are perplexed as in what to buy and where.
- Whether to buy a flat now or postpone.
- Whether to invest in an under-construction project or ready-to-move project without Occupancy Certificate (OC) or ready-to-move unit with OC.
Homebuyers are confused whether they should buy a house today or should wait for prices to fall. Besides, there are a plethora of options in the market, however, what remains a key challenge is whether the inventory stock available comprises the projects preferred by the buyer, addressed as “Likable Inventory”. That’s the key today. There may be offers of different kind of schemes, each project has a lucrative deal. But does the market comprises enough of likable inventory that aids the buyer to crack a deal or enter into negotiation.
A likable inventory for today’s customer is ready to move units with OC projects where all the facilities promised by the developer are actually existing. Although, the overall view in the country is that there is a huge supply of flats but a paucity of likable inventory has taken a toll on the entire market. For instance, the overall scenario for properties in Mumbai is:
- Over the last four years, the launch of new projects has dramatically come down due to various issues like change in DCR, stay of the High Court, Dumping Ground, MOEF, Civil Aviation, Defense NOC, Cost of approvals and many other reasons.
- Whereas the absorption of sales has been quite robust. In fact between 2007 to 2011 the rate of new projects being announced was twice the sales.
- From 2011 to 2013 the rate of supply i.e. new project introduced was almost the same to the absorption rate and since 2014 the new projects being launched was dramatically low.
Real estate cycle has also impacted the overall supply. From conception, approval, execution, and delivery, a realty cycle varies from 3-5 years and as affordable housing has shorter time span, following is the reality.
- Maximum new launches have come in the affordable housing segment and all the affordable housing projects sales are doing quite well.
- Hardly any new launches have come in the mid-luxury or the luxury segment that is for flats of the value of 1.5cr and above, there are hardly any new projects that were announced in a last four years.
- What is available in the market today are projects that were started 5-6 years ago.
- In the last quarter, only 8 developers had announced alluring schemes at the marginal cost that they can afford.
- Very few projects are available which are ready to move in with Occupation Certificate.
- The cost of construction and the cost of approvals have also increased significantly
- Flat prices today are historical low
- There is no way that the prices will drop any further for that these luring schemes, offers would continue.
- Very few supplies are available in the mid-luxury market at good locations and which are ready to move in.
- So dropping of the prices is the myth
- Even for under construction projects, from the first week of December, all luring schemes being announced will slowly be withdrawn. From February 2018, the flats will be sold at their MRP.
So if you are confused buyer then it is suggested to buy RTM unit with OC. As far as Infrastructure Development Government of Mahrashtra under leadership Honorable Shri. Devendra Fadnavis is concerned, CM has started Infrastructure Project of Five Lakh crore where the entire Mumbai and MMR will go to the next level of connectivity i.e. the level of connectivity what you see in New York, London, and Tokyo etc.