The high-end properties worth crores in elite areas are moving like hotcakes because buyers and sellers both are elite wealthy class but the commoners who own one bedroom hall kitchen, not finding buyers because the buyers and sellers both are from economy class. Prices will not come down further. The industry itself has already said that prices have come down by 15% in the past year. Obviously, for some developers, the cut could have been more, given the level of desperation there may exist. the construction costs haven’t come down. Yes, the steel and cement prices may have come down but labour costs have gone up, statutory dues have gone up and there is no significant reduction in land pricing happening. In the worst-affected pockets across India such Greater Noida, Ghaziabad, Mumbai, Navi Mumbai, and Chennai, where sales pace has dropped to a level that it will take 36 months and more for all existing stock to be cleared, developers need to struggle. But even in these real estate markets and others, credible developers with a delivery track record will continue to command a pricing premium. Many developers who have been lax and taken the buyer for granted have realized that fixing their business is the only way to win the buyer back. The focus has shifted from launching new projects to delivering existing ones.
Indian buyers usually pay for apartments before construction has been completed. Many buyers do not take-out mortgage loans. As a result, the ratio of housing loans to GDP is very low. In 2012, housing loans in India were only around 4.14% of GDP. The leading mortgage lender is the Housing Development Finance Corporation (HDFC) followed by the State Bank of India (SBI). Total housing loans in India were around INR 4,033.78 billion (US$ 63.36 billion) in 2012, up by 12.3% from INR 3,590.67 billion (US$ 56.40 billion) a year earlier. In June 2014, the Reserve Bank of India (RBI) kept its key interest rate unchanged at 8%. The RBI is expected to keep the key rate on hold at the third consecutive meeting in August 2014, according to HSBC. The Indian rupee (INR) continues to slide, following six years of sharp depreciation. On July 31, 2014, the rupee depreciated to a three-month low of INR60.55 against the U.S. dollar, this year in 2020 the scenario is even worse: one dollar is equal to 74 rupees. After lockdown Rupee has gone done, people lost their jobs and businesses, farmers are on road, students are yet to reach school, trains and transportations are yet to be opened completely. Huge lay off, shrinking sizes of startups, and above all the burden of EMI’s, the common man is at the edge.
The economy is not growing at a greater rate. Foreign rating agencies and Investment firms predict our growth rate to be a bit+1 or -1% less than the government announced rate. Indian companies are in huge debt so they cannot raise money unless they clear the balance sheet. PSU banks are in huge debt; they are not in a position to fund new ventures. A real estate inventory is at an all-time high. People are on a wait and watch mode, Stamp duties across states range from 6 to 10% (very high). Only desperate buyers for a first home or buying a new property. The second and third home buyers as investment options are going slow. Landowners who desperately need money are selling land at a discount based on their needs. Developers who can withstand pressure are not selling.
The major reason for the lowering property rates in India is demonetization then GST and now lockdown. According to surveys, residential property prices are now falling in majority of Indian cities and the nominal house prices have risen in some cities of its premium areas. If we talk about real estate trends in Delhi/NCR, there is a lot of panic and shock among the builders because transactions will be closer to the circle rates and the rates have come down by 25% to 30%. The builders with greater exposure to large-ticket premium properties projects are likely to be most afflicted. This has impacted on projects launched, where the major transaction is done by cash. Cities that are affected adversely by COVId19 lockdown are Delhi/NCR, Kolkata, Bangalore & Mumbai. Inflation is moving to the international standard, below five percent, which means gone are the days when year on year inflation is used to support real estate. If inflation is so low then interest rates will also fall for sure – Home loan will be 6% but it will not help real estate. Because it is value for money which is going on the wrong track. Now understand when FD is giving 7.5% and investors get negative returns on real estate then only the needy one gets the home and there is a huge gap between affordability and current real estate price. Every sector has high and low. Real estate is going toward low. The falling trend can be extremely fast – I will not be surprised if it falls 20–30% due to excess supply for the government. But it all depends on the government.