Despite the tremendous growth of residential real estate, the sector remained unorganized for the most part. In the last 3 to 4 years, residential real estate witnessed a slump mainly due to mismatch between supply and demand in terms of price and configuration.
Take Mumbai for example. Mumbai has over 83,000 unsold inventories. This constitutes 39% of the total units under construction. The absorption levels have also reduced significantly. Looking at the drop, new launches were halted. Compared to 2011, there was an 8% drop in the units launched.
The situation is even worse in Bangalore. Despite a good traction of residents working in the ever expanding IT sector, the real estate market has been somewhat stagnant. There are over 1 lakh unsold inventories, an all-time high since 2008. When converted, they amount to almost Rs 85,000 crore in revenue.
Soaring prices!
Realtors, builders and agents took complete advantage at the cost of buyers who had no clue regarding the antecedents of this sector and its entities. Enticing advertisements and offices of realtors in every nook and corner confused the buyers along with luring them into settling for higher prices for property they were purchasing. Expensive properties, deviations from the originally approved plan, lack of transparency and unreliable agents made many buyers apprehensive about making property deals and even buying property. This caused potential cracks in the foundations of residential real estate, which was on the verge of collapse.
Price correction
This led the realtors to work on their prices and right configuration to cater to client needs better and increase sale velocity of completed and unsold projects. From 2015 onwards, there was a visible comeback with an almost six-fold increase in launches of affordable housing projects. Moreover, buyers now have a multitude of options to choose from. They no longer need to negotiate in vain with realtors who will not reduce prices. This gives them the added benefit of flexible rates and attractive payment plans. What’s more? The Reserve Bank of India announced several sops and relaxations for people buying housing real estate in 2016-17.
A buyer’s market is one, which effectively works to cater to the buyer needs and demands. These changes helped to make residential real estate a buyer’s market.
Sops in Chennai
In Chennai, deduction in additional interest has been lowered for first time buyers. Furthermore, buyers got a reduction in cent-per-cent tax deductions allowing them to provide more affordable housing. The prices are thus favorable allowing the growth of real estate market in Chennai. The price ranges from Rs. 20 lakh-50 lakhs for a 2-BHK apartment. These prices go up if you go in for apartment providing basic amenities and located near malls and jogging parks. These reduced prices may further the cause of ‘Housing for All’.
Real Estate Bill
The Real Estate Bill, passed in early 2016, changed the residential real estate scenario. Under this, all real estate projects must be registered with the State regulatory authorities along with details of promoters, land status, layout plans and status of statutory approvals and disclosure of agreements and many other such details. It became mandatory to deposit 70% of the received buyer’s money in an escrow amount within 15 days of transaction. The money can be used for that specific project only. Alteration of project plans after necessary approvals were prohibited. This ensured that buyers got what they had paid for. Though it took time, it looks set to protect the interest of buyers.
Builders and developers have also began focusing on additional spending for furnishings and renovation. For the buyers, this is the best time to invest in residential real estate.