Project Delays Make Buyers Pick Resale Homes
As home buyers become more risk averse, sale of such properties is up 40% across the country in the last six to eight months.
New home sales may be few and far between, but resale of properties is booming. Sale of such properties is up 40% across the country in the last six to eight months as buyers become more risk-averse looking at the enormous construction delays, property brokers and financial institutions say.
According to Punjab National Bank and Indiabulls Housing Finance, around 35-40% of home loans being taken today are for resale properties, which include both apartments that are ready to move in and those that are in the late stages of completion.
“Primary sales have slowed down and prices have stagnated or dropped. Resale of properties, however, has been strong in the last few quarters,” says SS Bhatia, general manager for retail at Punjab National Bank.
Time over-runs in real estate projects have become a sore point with buyers. According to property research firm PropEquity nearly half of the 900,000 under-construction residential units are likely to be delayed by up to 18 months. Slowing of the economy to a 5% GDP growth level too has put doubts in the minds of homebuyers. Property sales across the country have dipped in the last year and a half because of rising property prices.
According to PropEquity, in the first quarter of the current fiscal 13,797 residential units was sold in Bangalore compared with 9, 742 units absorbed in Q1 of FY 2013. Other bigger markets like Mumbai Metropolitan Region absorbed 15,501 units, down 21%, National Capital region absorbed 26, 798, up 31% and Chennai saw 5953 units absorbed down 21% in January to March 2103 as compared to same period last year.
“People are more comfortable today buying homes that they can move in to or have a visibility of getting delivery soon,” says Renu Sud Karnad, managing director of mortgage lender HDFC Ltd.
Local brokers in Noida, Gurgaon, Mumbai and Bangalore say there are a number of speculators and investors in the market today who have picked up under construction properties in the last two years.
These people, says Samir Jasuja, chief executive officer of PropEquity, are desperate to get an exit and so there are a lot of distress sales out making it a good time for homebuyers to clinch deals.
“When the market is good, a buyer would have had to pay a premium for ready to move in homes or homes in projects that are in their late stages but today he could land a discount,” says Harinder Singh, managing director of Realistic Realtors, a real estate brokerage firm. In the last two quarters, his company has seen primary sales reduce by 70% while resale of properties has seen a spike.
The resale segment today is dominated by end-users, a majority of whom want to play it very safe, especially as they are bothered about construction delays.
“There is certainly a shift. People are concerned about delays and do not want to take risk when investing their life savings,” says Sumit Joshi, director of Noida-based real estate brokerage firm Real Credit Consultancy, which helps clients get home loans from banks and financial institutions.
Most people wanting to buy a house in Noida, says Joshi, are looking for homes that they can move in to within the next six to eight months and are wary of projects where they do not see construction reaching an advanced stage. While not all of these end users opt for a home loan, banks are certainly seeing an increase in demand in this segment.
“We are seeing more number of buyers opting for resale homes as prices continue to be largely stable in this category,” says Gagan Banga, managing director and chief executive officer of Indiabulls Housing Finance. A year back, says Joshi, most people were opting for new projects being launched by developers across cities.
- Time over-runs in real estate projects have become a sore point with buyers
- Almost half of 9L under-construction residential units may get delayed by up to 18 months
- Property sales across the country have dipped also because of rising realty prices