Pankaj Kapoor, MD, Liases Foras- Business News

Pankaj Kapoor, MD, Liases Foras

  • April 20, 2016  
  • |  
  • UPDATED   17:51 IST
Pankaj Kapoor, MD, Liases Foras

Real eatste market is in the transition state right now from investor driven market to an end user driven market. Pankaj Kapoor, MD, Liases Foras talks with Vivek Law, about how the real estate market is an end user market right now.

There has been a lot of concern, excitement as far as end users are concerned they are waiting the big question is are property prices going to come down further it has been stagnant for a while now. As far the investors they are genuinely concerned that 2016 is going to see some kind of a takeoff in the sector. So initially your preliminary thoughts, where are the real sector is right now?

If you look at it, it's in the transition state right now from investor driven market to an end user driven market. It's the time when it's shedding the extra fat in the cost and then trying to be a more efficient real estate.So what  happened in the past also the way the price has splurged, they have gone so high that the end users could not interact with the prices.

The gap between the purchasing power and the prices increased so despite being the housing shortage country we saw the inventory rising and the sales dropping. So it's a clear indication that the end user market actually got affected and they could not interact with the increased prices. And since the prices peaked and lot of investors who invested in past and they looked at the exit, they could not get a buyer to give them a profitable exist and they need the resource to reduce the prices.

That's when the sentiment related to the investors gone away. Prices became unproductive in past and that's when the moths inventories gone up, sales reduced, rental reduced. So it did not remain as a hugely investors market and in the last 1 ½ year we have seen that there is a downside in the prices in which we have build in the secondary markets, especially in the north India, prices have already reduced because all the investors were looking at exit and they are willing to give a discount.

And that also helps in the impact of the sentiment of the market. And since the inventories are very high and the sales are not improving so builders are also finding it hard to increase the prices. So there is stagnancy in the market. and has moved into time correction zones, and for 1 ½ year it will continue to be in time correction zones because if you talk about 8-12 months of inventories, efficient market remains, that means my sale should improve, it should improve at least 3-4 fold, and for that to happen the income should increase or the prices should undergo correctly.

The way the cost has gone up along with the prices it has give the developers very little scope to reduce the prices.They were waiting for the incomes to grow it's a period like prolong period of corrections when we are waiting for people for their affordability to get improved by virtue of interest rates or by reduction as we as income rise as there are little scope for prices to undergo corrections or time correction rather than sharp cut for the prices.

One of the trends we are seeing now is while developers are not necessarily cutting down the prices but there is lot of scope today more than ever for an end user to actually sit down and negotiate and drive down prices in a transaction, is that what you are saying as well?

Yes, it's a biased market and we are moving into the biased economy. So, from e-commerce to real estate, it's the buyer who is the king and the kind of discount available to each one of them because developers needs cash flow and they know end users have ample options and they are willing to give discount.

This is a market where the end user can negotiate hard to get a good deal. And there are good deals available in the secondary market because properties which are ready if you look at the census data, these shows that we have 72% increase in the vacant homes in the last one decade, so that means there is a huge ready inventory available which the investors can purchase and they may be willing to get a exit in those.

It's a time for them to negotiate, so it's an end user market I would say. But the interest rates are also coming down, which gives us a clear sign that it will be a period which will be driven only by the end user, I don't see too much of the investors participation coming by.