Property Price Outlook - 2016
Will apartment and property prices go up, stay stable, or fall in 2016? I am hit by this question regularly and increasingly as we approach a New Year. Through 2015, property developers and investors sitting on plenty of real estate have been hoping feverishly for sales and prices to recover. Those who want to buy on the other hand, have been demanding more discounts and cheaper homes, and are still not convinced that they should take the plunge.
Quite a log jam.
My first big question, with sales slowing down to levels I've personally not witnessed since starting The Property Show four years ago, will prices not come under more pressure in 2016? The answer was a categorical NO.
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Anita Arjundas, a business head who always presents her point with the most soft-spoken clarity, added "Look at data in terms of promotions, offers, and the fact that almost all projects today are launched on payment linked plans. So you pay 20% now, 80% on possession - that's straight discounting. Prices have definitely corrected at a project to project level by 10 - 15% and even where they have remained flat all through 2015, there is time discounting."
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But what about the unsold apartments across the country which have been hitting headlines? PropEquity data puts that number to an accumulated stock of 7 lakh units by September 2015.
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On unsold inventory, Projsha Godrej added, "There has been a mispricing and a misdesign of a product in many places, and I continue to believe that the products which are appropriately priced in locations people want to be in and are brought to market by developers people trust are really not seeing any dramatic slowdown."
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Many developers who have been lax and taken the buyer for granted have realized that fixing their business is the only way to win the buyer back. The focus has shifted from launching new projects to delivering existing ones. And the numbers say so too. New project launches have halved in 2015 vis-a-vis 2014.
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All three honchos agreed that the industry has to reprice the product and offer more amenities in the same cost to keep the buying momentum. With no room to cut prices further, shrinking the size may be the only way to keep projects affordable. "If smaller apartments is what we have to build to ensure and ensure better housing stock for the country, so be it. There is nothing wrong in building smaller size apartments," said Pirojsha Godrej.
My next big question for 2016: Will Indian property markets start recovering at some point in the year?
Pirojsha Godrej's assessment: "I'd be lying if I said I knew when that turnaround will happen, but I think it will happen sooner than people think, and I am confident it will be sharper than people expect. Because there is no doubt in any of our minds that there is going to be tremendous demand for Indian real estate and this is going to be a multi-decade-long road story."
He strengthened his argument with the following logic: "India today still only has 30 to 35 % population living in cities; that is dramatically going to increase over the next few decades. Indian income is continually growing, it may not grow as fast as all of us want but 7-8 % GDP growth is nothing to scoff at and when countries go through this kind of growth stage, real estate is a sector that always benefits disproportionately. So if you look at say Japan after World War 11, or if you look at China over last couple of decades, the scale of this sector is something where we are nowhere near approaching. Big Chinese developers for example sell 100-150 million sq. ft. in a single year. I think if you ask all of us, (even if) we combine our sales for the entire history of our organization, we might not get there."
So here's what I think: cut through the noise and get the deal you want on property in 2016. Because I agree with the view that when the turnaround comes, it will be much sharper than anyone expects.
Happy New Year.
(Manisha Natarajan is Senior Vice President - Corporate Affairs and Executive Editor - Real Estate at NDTV.)
Disclaimer: The opinions expressed within this article are the personal opinions of the author. The facts and opinions appearing in the article do not reflect the views of NDTV and NDTV does not assume any responsibility or liability for the same.
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