The Indian housing market is going through one of the toughest times. The problem is now in affordable housing too. The industry is grappling with a stockpile of unsold inventory. The NBFC crisis which spilt out from IL&FS and then DHFL has created immense pressure on the buyer’s market. Norms have become strict for buyers as banks and NBFC have reduced their book size. The liquidity crisis has created only a few buyers and a significant drop in demand. Rental is preferred more as compared to buying the same since buyers don’t want to take up long term commitment. IFAN find that the market stands at crossroads where “Opportunity is many but buyers are Few”. This is the time where IFAN portrays the picture of the Indian real estate current condition and how buyers can take advantage.
New constructions are going to be under threat as a developer will prefer to clear existing stock as the unsold inventory will take 5 years to 7 years to get disposed of. Over, 13 lakh houses worth Rs 9.38 lakh crore are unsold inventory. This turns out to be 5% of the Indian GDP. Before we get into high rise segment lets have a quick measure of Affordable housing condition. The maximum unsold houses (3.92 lakhs) are in the priority sector category, priced between Rs 1 lakh and 30 lakh. The priority affordable segment is having a burden of 3.06 lakh unsold houses with an average price tag of Rs 38 lakh in the Rs 30-45 lakh category. The current inventory stands out at 42 months high and hence it indicates that it will take significant time to clear the inventory.
The Real Blame:
The blame cannot be passed to GST. Trade war and uncertainty within the export market is one of the key triggers behind the loss of faith of buyers. If someone’s job is not secured then the buyer will not take the plunge of getting into EMI commitment. This is a grey area which is often ignored. Taxation was a problem but affordability of the retail client who is a salaried person points the finger towards economic weakness. The crisis of liquidity within the Indian economy has a lead significant drop down in the buyer’s appetite. Most of the buyers have postponed the decision to buy and hence we can remain hope-full that they will come back later.
IFAN finds that buyers have many opportunities to take advantage of the current situation and grab good deals. The current interest rates are no doubt an opportunity to take long term commitment as EMI outflow will be low but apart from this buyers needs to learn negotiation skills.
Few Negotiation Skills:
Conclusion: Opportunity is many but buyers are few
IFAN believes that unsold inventory level leads to significant price competition and hence buyers will be benefited significantly from the same. The revival of the Industry will take significant time as buyer’s confidence cannot be induced based on GST tax cut down or interest rates cut down. The global economic condition needs to support the buyer’s mind. Buyers can negotiate hard to get good deals and get quality products. One should remember that real estate should not be over-invested. First-time buyers have a huge taxation benefit hence they can take advantage of the low-interest rates. One should look for affordable housing projects as it offers good negotiation. One should follow the asset allocation strategy and risk profile while investing. One should not buy too many properties as prices are low and good negotiation deals can be procured. Over leveraged buying will create a problem for the asset allocation.