Property market showing signs of maturity

A key difference in the residential real estate market of today and that of 2006-07 (when the market was at its peak) is that buyers are being more selective now.

During the boom time, property prices were going up everywhere – whether it was an A-grade property or a C-grade one, whether in a tier-2 town or in a tier-3 town. It was only euphoric sentiment that was driving prices higher. Now things are a little different.

You see each property market responding to local factors, and there is no one direction in which prices or rents are moving. There are pockets where prices are rising, others where they are stable and some where a correction may still happen. That is a very positive sign and shows that the real estate markets are maturing, and so are buyers. Because of the variation, now there seems to be logic in the price rise or decline in a market.

Another encouraging sign is that buyers have now also started looking at factors like infrastructure and connectivity instead of just buying what they could afford.

Project delays, which have been of concern to a lot of potential buyers, are also likely to improve gradually. Developers have realized that instead of spreading themselves thin across the country they need to focus on key markets and improve their track record. The consumer, too, has many platforms to raise his voice and, therefore, developers cannot afford to tarnish their reputation with delayed projects. We will now see developers speeding up delayed projects and sticking to the delivery date.

Another apprehension is that investors (rather than end-users) are coming back in the market. However, the word investor is highly misunderstood. Investing is not a bad word.

Most people think of only two broad categories — the end-user and the investor who is supposed to be a speculator. However, there is also that category of potential buyers who may have some extra money on their hands, may have received a bonus and who want to look for a second house. Most will do so by taking another home loan. These people, in all probability, will not look at selling their property in the short term and will stick to their ‘investment’. These are not speculators.

Yes, there are professional investors, whose job is to buy and sell properties, including those looking for short-term gains. But the market comprises not only the professional investors but also all the three categories. And today, it is the first two categories (end-users and long-term investors) that are keeping the market stable.

One must also keep in mind that in 2008-09 there was hardly any retail investment in the real estate market because of the global sentiment and the overall economic slowdown. Now, after waiting on the sidelines, some people are coming back to the market as property prices have moderated, mortgage rates have not gone up and buyers have plenty to choose from.

File photo