The demand for under-construction properties remains strong, especially with the festive season round the corner, even as the number of new project launches are shrinking compared with the previous year. According to an exclusive nationwide survey conducted by property portal 99acres.com and Mint Money, a majority of prospective homebuyers want to buy under-construction properties since they cost less.
In other words, while the demand is high, supply is reducing. Another study corroborates the trend. A joint annual report, Embracing Change: Scripting the future of Indian Real Estate, by property consultants Cushman and Wakefield and Global Real Estate Institute estimates that the total demand for residential property in the next five years will be 2.3 million units. “But the estimated supply in the same period is expected to be about 1 million units leaving a shortfall of over 1.3 million units,” it added.
The Mint Money-99acres.com survey was conducted in nine cities (Mumbai, New Delhi, Bangalore, Chennai, Kolkata, Pune, Hyderabad, Nagpur and Ahmedabad) and incorporated responses from around 3,000 prospective homebuyers. The survey covered people in the age group of 18-54 years; the maximum number of respondents were between 25 and 45 years of age.
Why is demand up?
Factors such as rising policy rates and increase in the cost of construction and labour are to be blamed for the drop in the number of launches. “In addition, there are regional challenges too,” said Vineet Singh, business head, 99acres.com. “For instance, Noida’s market is witnessing a fall in transactions and sales volumes because of the land acquisition row in neighbouring Greater Noida.”
But demand seems to be up. Almost 49% of prospective homebuyers who plan to buy a house will opt for an under-construction property, the survey said. But there are specific reasons for that.
Price advantage: Under-construction properties are in great demand because of the appreciation potential, apart from being available at cheaper price points compared to the secondary market. “The reason why most buyers look at under-construction properties is that these come at lower rates compared with ready-to-move properties,” said Arjun Puri, director, Puri Constructions. “In addition, these offer huge appreciation potential.”
Festive spirit: The festival season is also causing the spurt in demand.
Almost 60% of prospective buyers said they would time their purchases during festivities. Almost 70% of the respondents said that freebies make the deal more attractive. Freebies and discounts being doled out by developers include return tickets to foreign destinations, a car and 7-8% discount on the sale price are some of the freebies on offer.
Another key finding
Prices to remain stable: It is expected that prices in the existing projects will remain stable in the next three months. Due to drop in the number of project launches, the fewer new launches will have realistic price levels.
According to the survey, a majority of buyers (37.5%) and real estate consultants (57.8%) expect prices to remain stable even after the festive season.
It is unlikely that there will be any price correction, except in a few areas, where prices are too high. So if you are buying a house to live in, enter the market as soon as you get a good bargain. What may work out for you during festivities is the small discount that the developer will offer. Bargain hard to get more discounts.