Real estate slump: Is it time to upgrade your property or buy a second home?

By Sunil Dhawan, Economic Times.

The real state of the real estate market is quite dismal for the builders. Finished and near-finished homes are readily available, but there is hardly any demand. Several projects are still stuck in the construction phase and far from completion.

Kishor Pate, CMD, Amit Enterprises Housing, says, “Property valuations are at their lowest point and developers are more than ready to negotiate with serious buyers.” So if the prices haven’t gone up and have, in fact, more or less stayed stagnant, can investors now upgrade or move to a bigger house or go for a second home?

“There was a trend of buying second homes few years ago, but slow growth and high interest has put a stop to this trend as the returns are not good. Real estate as an investment option is being put on the back burner as the returns are poor currently,” says Manavjeet Singh, CEO & Founder, Rubique.

How low are the prices now
A builder typically has several cost heads comprising the total cost of a fully constructed building. First is the ‘basic rate’, represented in per square foot (psf). In addition, there could be a preferential location charge (PLC), car parking, club membership charges and others. (Other charges could amount to nearly 10-15 per cent of the actual cost.)

Most developers seem to be going easy on these and might waive them off. Shveta Jain, Managing Director, Residential Services, India, Cushman & Wakefield, informs, “Builders have generally been resorting to means that make the overall deal attractive for the buyer. This has been due to the compulsion of a high unsold inventory and a tight liquidity situation for the developers.”

Different developers are resorting to different ways to lure customers. Pate says, “They will offer to reduce the cost of a home in their projects in other ways. Fully-furnished homes are only one such avenue. The most popular offer right now is all-inclusive rates which cover the usual cost of stamp duty, registration and value added tax (VAT). No Equated Monthly Instalment (EMI) schemes are also popular, though buyers should carefully study the fine print and long-term implications of such offerings”