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This is the right time to buy house, says Santosh Kumar of Anarock Property

Goutam Das     August 21, 2018

The crisis-ridden Indian residential real estate market is showing some signs of revival. Developers, who were just focussed on expansion, have now realigned their priorities on construction and completing held-up projects. Unsold inventories have started reducing. Santosh Kumar, Vice Chairman at ANAROCK Property Consultants, tells Business Today's Goutam Das about the genesis of the crisis and why consumer confidence may be making a comeback now. Edited excerpts:

How did the current crisis in Indian real estate begin?

India was a distance away from the global financial crisis of 2009. We survived till 2011. Everyone had a lot of money - there was liquidity. Everyone started acquiring land parcels as if parcels are going to be over. Every developer ventured into cities where they didn't have strength. People from the West went to the South. The major impact was on developers in the North. Land is a state subject. Unless you have strength in that particular market, it is going to be an expensive proposition. You need to liaison with the government, and the approval authorities. Developers got stuck. In some cases, developers couldn't get the title of the land. In many cases, agricultural land had to be converted. There is a history you need to verify. Many went with slum acquisitions in the West. Liquidity started impacting. Projects started getting delayed. The focus was not on construction, but expansion.

Consequently, the consumer's confidence started declining. It led to a stage where there was huge supply in under construction property. That began a downturn in the realty sector. Since 2012 onwards and till 2017, the market was very apprehensive. Policy changes happened in this period. NBFCs started helping the developers by giving them debt but at a high cost. That also impacted the market. The liquidity position of the developer started getting worse because sales were not happening. Sales is the easiest source of cash flow. The focus was less on construction - it  was more on cleaning up the land which was stuck. They were raising more funds. They had to pay salaries. So, there was no income from sales while there were only outflows.

Do you sense a revival this year?

Developers have started focussing on construction. After construction, they deliver, and then raise funds. That's how the revival started. With RERA, the customer is now confident. There are some positive indications. There is demand for completed projects. Unsold inventories have started reducing. This will push developers to launch projects in the near future.

Has the demand mix started correcting? 90 per cent of the demand is for apartments below Rs 1 crore and this supply used to be skewed in many markets...

When the market was buoyant, everyone wanted to construct larger houses. There was no real trend on the price. The size and price both went up - beyond Rs 2-2.5 crore. But there was always a customer in the next segment not targeted by most. It could be because of local laws - in Haryana, for instance, you need a certain density - because of density norms, you cannot construct smaller houses. The ticket sizes therefore went beyond the budget.

Now these laws have changed. People have now realised where the demand is. So developers have started re-launching their projects or re-modification of size. There is a huge demand in the Rs 60 lakh-1.8 crore segment. There is also a demand for properties in the Rs 25-45 lakh category.

Will prices firm up anytime soon?

If demand is more than supply, prices will firm up. It has been constant for the last two-three years. Except Mumbai, you will not see much of a price appreciation in the near future -  at least for 1-1.5 years. Which is why this is the right time to buy house.

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