Anurag Jhanwar, Business head (Consulting and Data Insights), PropTiger.com- the one-stop online platform for home buyers, tells SHAILENDRA TYAGI that affordability and end-users are going to define the rules for the residential property market. With 97% of the total demand for homes coming from the actual consumers, further downslide in home prices is going to be limited, he adds.
Q: After a long gap, India’s residential property market seems to be stabilising. What according to you has triggered such a welcome change?
A: In the past two years, we were continuously looking at new bottoms. But, today we have reached a stage where new launches are at 12 quarters low while the sales in the past four quarters have been in the range of 49,000- 57,000 units — fairly decent numbers. This gives a possible indication that the market is now stabilising. The end-user demand now is almost at 97% of the total demand which means that it is the actual end-users — unlike speculators in the past — who are driving the sales. This gives further comfort that bottoms or further downslides in home prices here on are going to be limited.
If we talk about the most obvious triggers, the foremost is that the prices have remained range-bound, especially in the past two years. The second trigger has come in the form of incentives being offered by developers which have reduced the actual landed cost for the buyers. Many fence-sitters have started making purchases. Thirdly, the inflation-interest rates dynamics is also turning favourable thus, bringing the purchasing cost lower. Lastly, the Real Estate Act has given a great policy push to bring in the needed transparency in the sector.
Q: Would it be fair to say that India’s residential property market has totally become an end-user market?
A: We are not there yet but slowly moving towards an end-user market. The nature of India’s residential property market is fast changing now. The market, where investors/speculators could make money in a short span of time is not there anymore. There is a lot of unsold inventory for buyers to choose from. Till these unsold homes are actually sold, we would continue to see end-users driving the market for homes.
Q: Which category of home-buyers have been taking active interest in buying homes and going forward, where do you see the dominant demand for homes emanating from?
A: In the last three years we have seen that the affordable segment — below Rs 50 lakh price range — is commanding more than 50% of the overall sales and with the push provided in the budget, both for boosting demand as well as supply, we can see more supply coming in the affordable segment. So, we might see an incremental push on the affordable side in the short to medium term.
Q: How are developers responding to the changed market dynamics?
A: In the past two to three years, developers have been trying to make homes affordable by reducing the size of an apartment but without impacting its overall efficiency. There are micro-indicators which are telling developers about the driving power of the end-users, particularly those in the affordable segment. Developers are also responding by being more transparent about their legal compliances and their delivery time schedule which is a welcome change for the consumer as he is getting more information on board.
Q: RBI governor Raghuram Rajan feels that there is still a scope for reduction in home prices which, in a way, also points out that it is not actually a buyer’s market yet.
A: A buyers market is not only about pricing. It is also about getting the right product. It is a fact that the orientation of the developers towards consumers is much friendlier and more transparent now. Developers are more inclined towards bringing something which can help buyers take decisions to buy homes. There is a need to understand the cost structure of each project. Unless we know the break-up cost of each of these projects, it is difficult to say how much reduction can still be made by a developer. There might be instances where there is a scope for price reduction but this cannot be applied universally.
Q: Has the black money component in the residential sector gone down?
A: What I would like to say is that as more institutional money comes to the residential sector, we would see more transparency coming in the system. The government’s thrust on transparency indicates that we are moving towards an organised market. The scenario, where the prices were increasing too fast, is not there anymore. Since accountability on all stakeholders has increased, it is easier now to see the trail of money. So, we are actually going in an organised set-up and with the Real Estate Act (RERA) in place, the market would become even better. As long as the end-users continue to determine the nature of the market, we would see more stability.