Indian Real Estate Scene in the fourth quarter of 2013

http://www.indianrealestateforum.com/general-property-discussion/t-indian-real-estate-scene-fourth-quarter-2013-iref-65184.html

We are now in the latter half of 2013 and so far the year has seen a cooling off with respect to new launches. The focus has instead shifted to resale of booked under-construction flats.

2010, 2011 and 2012 saw large number of new projects being launched. The hottest markets proved to be Gurgaon, NOIDA, Pune and Bangalore. The per square feet price of flats booked from builders saw steady and heady rise.

In NOIDA from a low of 2500 to 3000 psf all inclusive price at project launch in 2010, the rates doubled to 5000 to 6000 Rs psf by end of 2012. In Gurgaon where more upscale apartments were launched, prices again doubled from a low of 3000-5000 Rs psf across different segments in 2010 to a high of 6000 to 10,000 Rs psf in different segments and locations by end 2012. Microsegments within NOIDA like the NOIDA Greater NOIDA expressway saw the best price performance. NOIDA extension, now re-christened Greater NOIDA West had a turbulent phase due to land ownership issues but still the prices nearly doubled as compared to launch prices. In Gurgaon, the Golf Course Extension Road, the Dwarka Expressway and Southern Peripheral Road saw swift price escalations. Many investors who flipped bookings i.e. made a booking and then sold it using bank leverage saw very high profits with low capital being deployed. Ploughing back these profits into newer bookings in other fresh launches was a very lucrative transaction. During these years, the bulls had won over the bears.

The first half of 2013 has seen a slowdown in price escalations. As a result, fewer new projects have been launched and the high asking prices for new launches has seen slower offtake. This has limited price escalation. Fresh bookings were at very high prices which stopped month on month escalation and became stagnant. Booking and flipping was therefore no longer viable. Numerous discussions on IREF have evaluated the slowdown period and many varied opinions have been expressed included heated arguments.

Some conclusions can be derived from the expert opinions from IREF, which are summarized below:

1. The high rates of inflation and Rupee depreciation directly feed the real estate price inflation and hence despite the current stagnation in prices, chances of price falls are unlikely.

2. Price falls are likely to be related to stalled projects and hence one should focus on quality of delivery only.

3. Cost escalations due to rise in prices of raw materials due to imported inflation, transport of the materials, cost of labour and increasing regulatory hurdles on land acquisition, project clearance, river sand, ground water usage for construction and high cost of funds have increased the base cost of apartments. This has put a floor on the flat prices. Rising circle rates have also put a floor on prices.

4. The phase of booking at fresh launch is no longer the most active segment.

5. Investor interest has moved to resale purchases. Focus is on the delivery of completed flats by builders. Flats which have seen good construction speed and are close to becoming ready to move (RTM) have showed better appreciation in prices.

6. End users should concentrate on delivery schedules and the builders ability to stick to delivery milestones.

RTM resale purchase is likely to be safer provided due diligence is exercised. Many threads discussing the due diligence procedures in resale purchase are available on IREF. These threads will be useful for end users who are not used to real estate transactions and who would like to familiarize themselves with the process.

http://www.indianrealestateforum.com/real-estate-gurgaon/t-steps-resale-deal-16303.html

http://www.indianrealestateforum.com/real-estate-gurgaon/t-how-buy-under-construction-partly-paid-flat-resale-using-home-loan-20281.html

IREF has been successful in tracking these markets and price trends as encapsulated in different discussions. Long running threads of discussions between the bulls and the bears saw a comprehensive win for the bulls in 2009, 2010, 2011 and 2012.

2013 has been the year of the bear. However this stagnation in prices was well anticipated in both Gurgaon and NOIDA as can be seen in the following threads:

http://www.indianrealestateforum.com/real-estate-gurgaon/t-bubble-may-set-burst-again-16152-page915.html

http://www.indianrealestateforum.com/real-estate-noida/t-tables-have-started-turning-resale-rates-stagnant-52400-page164.html

So an investor would have received adequate warnings from these discussions to offload his bookings by taking profits and staying away from fresh bookings. Current discussions on IREF are exploring the opportunities within different segments. Current opinion on safe real estate investments for the latter half of 2013 have hit upon the following opportunities:

1. Buying flats which are close to RTM due to good construction speed is the best opportunity. A 20-30% premium for completion is likely on delivery. So a good appreciation within one year is possible by choosing the right project.

http://www.indianrealestateforum.com/real-estate-noida/t-wait-buy-only-rtm-noida-avoid-lots-risks-34781-page81.html

2. The plot market is stagnant. Wait and watch for further price falls is the best approach and not to enter now.

3. Fresh bookings to be avoided due to high prices and poor appreciation.

4. Weak builders are risky and it is better to pay a premium for a safe builder.

5. Peripheral locations like Dwarka Expressway, Yamuna Expressway, Daruhera etc are better avoided in these market conditions.

Readers wishing to make fresh purchases in the RTM projects, either for end use or for investment, can get good details from the following threads:

http://www.indianrealestateforum.com/real-estate-gurgaon/t-new-gurgaon-sectors-8x-3x-9x-project-construction-status-resale-prices-30341-page189.html

http://www.indianrealestateforum.com/real-estate-noida/t-noida-projects-ki-kahani-pictures-ki-jubaani-21997-page77.html

The above threads are dedicated to putting up the latest construction pictures as well as finished status of the apartment interiors so that a prospective buyer can get a good idea of which projects are in late stages of construction and might be worth buying either as investment or as end user.