Favourable for end-users

Favourable for end-users

After the recent price cut, most developers would have squeezed their margins close to the minimum level, so we do not foresee any further price correction.

Rohtas Goel
Rohtas Goel, Chairman and Managing Director, Omaxe Ltd

The real estate sector will be a more favourable place for endusers in 2009. Some developers have already taken the initiative to offer 1-5% discount on the basic sale price of existing projects and 5-10% discount on new projects. Such initiatives will not only boost demand but also reduce the burden for customers. The most important question for potential buyers is whether the prices will come down further. Frankly speaking, no. After these price cuts, most developers would have squeezed their margins close to the minimum level, so we don’t foresee any further price correction. The market is offering the best price to both end-users and investors, with the added advantage of bargains for the best deals.

While home loan rates are still high, this is the best time to buy since property prices have started falling to reasonable levels and the chances of an upswing in the future are more compared with other asset classes. Real estate still holds the prime position as a lucrative investment option in the long term. Housing is cyclical, but usually it does not stay at the bottom for very long.

In terms of potential price appreciation, the best deals are in tier II and tier III cities. Cities like Faridabad, Ghaziabad, Sonepat, Ludhiana, Lucknow, Guwahati, Bhubaneswar, Surat, Nagpur, Indore, Visakhapatnam, Kochi and other state capitals are some of the emerging hot spots. This also indicates that there is a geographic shift in demand and companies need to understand this. The demand in metros will slide, but will be compensated by the rise in demand in other cities.

The mid-size developers with small projects will continue to struggle because many had jumped in without a complete assessment of their capabilities. The realty market is in a consolidation phase and small players can only survive if they bid for projects together. The larger players, however, can emerge from the meltdown relatively unscathed. The current turmoil is largely driven by global markets and the main challenge lies in reducing dependence on global funds.

The credit crunch will soon be memory and cash-rich buyers will gradually return to auction rooms. However, not everyone will be able to take advantage of the upswing. Those with negative equity will be left further behind when the prices begin to rise.