Chennai: While investment banks and brokerages leave no stone unturned to announce that the slow-down in real estate and prices are supposed to have actually ‘softened’, the responses from any individual who has tried renting an apartment or buy real estate in recent times will be just the opposite.
Be it Chennai, Mumbai, Delhi or Bangalore, low prices seem to be an illusion. Some pockets may have seen sharp drop in prices but land prices continue to be out of the reach for the aam aadmi. “Certainly, there is a need for policies to help promote real estate which will regulate the statutory tax structure across different states in the country. There should be clear-cut policy on price fixation which will give a tremendous fillip to the real estate industry and truly give it an ‘industry’ status,” avers Mr R. Balaji, Chief Executive Officer, Propmart, Bangalore (www.propmart.com). His company provides end-to-end property solutions to builders as well as property buyers and sellers.
Ideally, a policy should reduce the gap between demand and supply, he reflected during a lunch interaction with Business Line. Though Indian real estate market is getting mature, one of the main reasons for the skyrocketing prices is due to its unregulated nature. No regulation means no price control and then the price depends upon the perceived demand.
Excerpts.
First, is this the right time to buy or sell?
It is the right time to do both! Why? Because the real estate market is now getting matured. The maturity is reflected in the fact that corporates and foreign direct investments (FDI) are getting into real estate. They are not into speculation. In a mature market, both buyers and sellers benefit. We have crossed the stage of bias when the market favoured either the buyers or sellers.
As an industry expert, what do you see as the key drivers behind the skyrocketing price of real estate in most metros today?
It is primarily the demand for real estate which has led to the increase in real estate prices. The reasons for the demand are many.
First, whatever happens globally has a reflection in India. Today comforts have become a need or a necessity and hence the demand for luxury products. Similarly, today the lifestyle of people demands luxury living and hence the demand for villas, apartments and all kinds of property with a variety of amenities. Secondly, today purchasing power is actually ‘borrowal power’ so a customer can leverage himself that much more.
Another reason for the skyrocketing prices is real estate in India is not a regulated market yet and hence there is no price control; the price depends upon the prevailing demand.
Who is buying now – investors or end users?
I would say, both. But today, we can classify the buyers as big investors and small investors, instead of investors and end users.
End users have become small investors primarily in Tier I and Tier II cities. But both big as well as small investors do not prefer long term. Both prefer short to medium term appreciation. And both look at land as the most preferred investment option.
What would you advise a working young couple that finds prices of apartments exorbitant?
Working young couples, especially in the below 35 years category constitute a large percentage of buyers today. Since this category has a huge ‘borrowal power’, they should not hesitate to look at the city’s outskirts for property options, be it for end-usage or for investment. Today, young couples need not base their decision on location.
My advice to young couples would start with asking them to look at investment in property as a short-term investment option for quick appreciation. This is unlike our times where people used to get emotionally attached to their property.
Many integrated township projects are coming up in all major metros. How far would it be advisable to buy flats/houses, as a first-time buyer, in far-flung new townships?
Today, tech parks and industries are being set up, not in the central business district (CBD) but in the outskirts of cities. Major malls and shopping complexes are also following suit. Today, what is available in the CBD is also fast being available in the outskirts. Hence, integrated township projects are becoming the order of the day. Work-live-play means that you work and shop in the vicinity of your dwelling.
As I said earlier, location should not be the driving factor for purchase of residential property. First-time buyers must look at the outskirts for end-usage. As long as a township project is well-guarded by their security, safety will not be a prime concern.
Can a softening of home-loan interest rate for amounts less than Rs 25 lakh boost demand for real-estate?
Yes, the softening of home-loan interest rate for amounts less than Rs 25 lakh will lead to an increase in demand but only in the Tier-II and Tier-III cities because in Tier-I cities, supplies below Rs 25 lakh will be minimal.
Is there a need for policies that help promote real estate, and also unlock value in the existing properties?
Certainly, there is a need for policies to help promote real estate which will regulate the statutory tax structure across different states in the country. There should be clear-cut policy on price fixation which will give a tremendous fillip to the real estate industry and truly give it an ‘industry’ status. Ideally, a policy should reduce the gap between demand and supply.
Last question. Do you see technology playing a big role in real estate?
Exactly, technology is playing a vital role today in the real estate industry as it provides solutions across segments of the real estate industry.
At the click of a button, you can get information, comparative data and all details without having to physically go and inspect the property. The global real estate market today is just a click away!
I foresee that technology is the way forward and the day will not be far when transactions will also start happening through the Internet.
Published by D. Murali and Kumar Shankar Roy
