CEO SPEAK - `60 sq m in carpet area and infra status to budget home segment will be a game changer'
HOW IS THE MARKET? THE GENERAL PERCEPTION IS THAT IT IS LANGUISHING FOR VARIOUS REASONS.
No, it is not languishing! I am not being defensive in asserting this, as I have good reasons to say so. Of course, the sector is facing problems in some areas.
Times have changed. Go back a decade ago-there were so few developers around and it was a sellers' market. But, slowly, the number of players has increased and, so too has competition, which benefitted buyers. They now have a plethora of options to choose from before they lock a deal.
The quality of construction improved a lot and prices do not move up in line with inflation. In the south, like Bengaluru and Hyderabad, property price are still in the range of Rs 4,500-5,000 per sq metre, on a par with the Delhi NCR and Mumbai.Prices did not move up at all for the past some time and, in fact, consumers in all markets are spoiled for choice today.
As supply of houses increased manifolds over the last one decade, there are unsold inventory in some markets like the NCR, which has affected the profitability of developers. But these are market dynamics and will correct soon.
As supply outstripped demand in some markets, there is a perception that market is languishing.
But look at the commercial real estate segment.It is doing very well and the market registered a net off-take of over 40 million sq ft of space last year.
THERE IS A HUGE PROBLEM OF DELAY IN DELIVERY; HAS THE MARKET SENTIMENT TAKEN A HIT TOO?
Yes! The NCR is facing that issue. But not all the projects are delayed nor every developer in the NCR in this league. Credai is asking its members to ensure timely delivery of projects, as it is of paramount importance for developers to gain the confidence of buyers. With RERA set to kick in, such issues will be resolved.
WHAT DO YOU THINK ABOUT PRICES? AFTER THE DEMONETIZATION OF LARGE DENOMINATION CURRENCIES, IT WAS BELIEVED THAT PRICES WOULD FALL.
Our margins are already in single digit and we cannot afford to bring down prices further. In fact, a slight slip in implementation and the project goes into loss. There is a lot of confusion in the market that demonetization would lead to fall in prices.Many buyers are waiting for prices to lower further, which is not possible.
Thus, sales are certainly sluggish; this should be temporary and I would not characterize this as slowdown, but postponement of the commitment to buy--which is also fine. As prices remained stagnant, there is hardly any new launch in the country. With RERA looming round the corner, developers are cautious in launching projects. All these developments will lead to supply constriction. Soon, there will be situation where demand will outstrip supply in all segments, including general and luxury housing.
Therefore, contrary to the expectation of further fall in prices, I believe they will only go up in the future and this is the best time to buy or invest in property. There are any number of projects under construction, apart from unsold inventory--new launches are not happening. Ultimately, we will be constrained to increase prices in the future; if buyers are waiting for further price reduction, it is not happening.
PM MODI HAS TAKEN A LOT OF INITIATIVE TO ACHIEVE A TARGET OF 2 CRORE HOUSES IN URBAN AREA BY 2022; BUT, WILL THERE BE SUSTAINABLE DEMAND FOR AFFORDABLE HOUSING?
The recent budgetary decision in giving `infrastructure' status to affordable housing is a major push to revive the real estate market. We are hopeful that this will provide a big fillip for affordable housing; however, the change in definition of affordable housing to 60 square metres in carpet area instead of built-up area in non-metro cities will drive demand. At the same time, as the affordable housing sector has been brought under infrastructure sector, developers will have more funds at their disposal.
The PM's target of 2 crore houses in urban areas by 2022 is achievable if infrastructure like roads and Metro network is improved on a war-footing across the country, as the success of affordable housing depends on good connectivity from residential areas to commercial districts of towns and cities.
The time to travel to workplace should not be more than 45 minutes. As the land prices near city centres are very high, affordable houses cannot be built there. Therefore, these housing projects have to be developed on far-flung areas where land is available at affordable price for these projects. For any project to be successful, it has to be well connected too.