Real estate market is unlikely to witness a crash:’s reports

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New Delhi, Jan 7 (ANI): The prices in the Indian residential real estate market have remained stagnant for more than two years now and are unlikely to see major correction reflects’s latest price trend report.

The report consists of the evaluation of the weighted average price for 11 major cities like New Delhi, Gurgaon, Mumbai, Pune, Chennai, Bangalore, Noida, Kolkata, Ghaziabad, Ahmedabad and Hyderabad.

The analysis has been done for a two year period from quarter ending July-September 2013 to July-September 2015. The database of actively listed properties on Magicbricks for each city has been used for analysis.

The report reflects that prices have either seen marginal increment or have actually gone down. Even in cases where there has been some increment, adjustment for inflation erodes any increment. Therefore, while developers have not explicitly reduced prices, there is an element of ‘time correction’ of prices.

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On an average, properties today cost same as two years earlier. This is the implicit correction in prices.

The argument of large unsold inventory leading to price correction does not hold true because the inventory is not homogenous in terms of development status. Projects are in different phases of construction and subjected to different pressure. Those closer to completion have lesser reason to reduce prices.

And unless a consumer is confident of timely delivery, consumers are unlikely to opt for discounts in projects at low to intermediate stage of construction. The report also concludes that while large unsold inventory would continue to put pressure on the prices, the market is unlikely to see major correction.

“Despite facing rough conditions over the past two years, real estate industry has ended on a positive note in 2015. The market is at its lowest and this is the right time to invest in the market,” said E Jayashree Kurup, Head of Content and Research,

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“Lucrative deals from developers on residential housing including attractive payment options make owning your dream house a very attractive option. Recent government initiatives like the Real Estate Regulatory Bill will help in cleaning up and organising the industry has generated positive consumer sentiments across the country. Smart city missions will spruce up TIER II cities, resulting in higher accommodation capability which in turn will reduce the pressure on the TIER I cities,” added Jayashree.

Developers are unlikely to undertake explicit price correction as it will result in negative sentiments about the market amongst the buyers. Buyers may choose to wait further for more correction in prices leading to a downward spiral and erosion of whatever sales happening at present. This will have opposite of the intended effect.

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Additionally, the large unsold inventory being talked about is not homogenous. Projects are in different state of completion. Consumers are likely to opt for projects with visibility of completion or by developers with good track record. Such projects/developers have no incentive to reduce prices.

And even if deep discount is available in projects in early to intermediate stages of construction, a consumer might not opt for the same if he is not sure of delivery timeline or reputation of the developer. (ANI)

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