New Delhi, March 17, 2018: Traditionally, the Gudi Padwa festival season is an auspicious time to
invest in real estate. Considered a time of renewal, it coincides with
Punjab’s Baisakhi, Tamil Nadu’s Puthandu, Andhra Pradesh’s Yugadi and
Kerala’s Vishu. Since a large cross-section of Indians tend to link
property acquisition with auspicious dates, activity levels on the
property market tended to increase visibly in this period. However, Gudi
Padwa 2018 is not likely to bring the accustomed uptick, which – though
almost non-existent even in the last 2-3 years – arrived to the backdrop
of a more complex set of challenges than ever before.
This year, this festival will be juxtaposed with some interesting market
dynamics. The residential real estate market in many cities has been
slowing down, and developers are hoping that Gudi Padwa will prove to be
a turning point for many developers who have been struggling with slow
sales as well as policy-induced compliance pressures and generally
negative market sentiment. Indian developers tend to look at
tradition-fuelled appetite for housing purchases during festivals like
Gudi Padwa so as to mitigate slow sales during the rest of the year and
offer lower prices under the guise of festival discounts.
What we are seeing on the ground as Gudi Padwa rolls around in 2018 is a
very different picture A quick look at the first quarter of past few
years indicates that SALES HALVED FROM 90,000 UNITS IN Q1 2015 TO 45,000
UNITS IN Q1 2017, demonstrating a shift in buyer behaviour amidst
changing market conditions. Structural changes and policy changes such
as demonetization, RERA and GST have certainly also helped to bring
sanity into the Indian real estate sector. Investors, who were
instrumental in driving up prices in previous years, are no longer a
major factor either.
In fact, residential rate trends across the seven major cities clearly
reflect that the tepid buyer sentiment has had an impact on developers’
previously exuberant price-tagging. While inflation and increased
execution costs – and, more recently, RERA compliance costs – have
caused inevitable increases, these are marginal at best and nowhere near
the adventurous ‘price discovery’ increases which worked in previous
years, when investors were still a major factor.
In other words, Gudi Padwa 2018 arrives to the backdrop of still-tepid
housing absorption in major cities. This can be attributed to the fact
that Indian real estate sector is still in the throes of a major course
correction – a journey that has put buyers into an extremely cautious
mode which is unlikely to relent on mere tradition-based grounds.
On a positive note, the restricted new launch pipeline and developers’
increasing focus on project completions will surely cause unsold
inventory to reduce over time, and demand will soon begin to rise.
However, this will not happen in time for Gudi Padwta to save the day.
Corporate Comm India(CCI Newswire)
