Price correction a key measure for real estate growth in India

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The Indian real estate market is ever challenging today. With unsold inventory and costly lending rates existing without much relaxation, growth and further expansion of the realty sector seems unrealistic until now. New Year certainly dawns semblance of positive hopes based on factors, including real estate bill and others. However, predicting growth for reality based on these factors would deem to be someone’s ‘crying wolf’ hunch. As a matter of fact, various factors involve to determine realistic growth in realty, and price correction is one effectual measure. Price is one of the factors determining if realty will take upward growth trajectory or swerve into a steep dive.

The factual growth in Indian real estate is still divisive, as price correction, which is one of the most imperative measures to be taken up to resolve the issue of lukewarm sentiments from fence-sitters, is not being taken into practice, on practical and realistic ground. Price correction, allied with other factors, such as property’s replaceability, resale values, location’s notability and feasibility of various amenities in the proximity, are effectual measures to boost sales values of residential or commercial properties.

Meanwhile, the comparable pricing comes as one of the prime factors, strong enough to influence buyability of any property.

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When a property is priced correctly in sync with the market level, and mostly in commensurate with buyer’s budgetary capacity, the likelihood of getting a property sold jumps up manifold. Faster sales of inventory, therefore, largely depend on the factor of price flexibility, much to the satisfaction of buyer’s budget.

Sellers need to bring down price of their inventory

Though the price reduction doesn’t happen up to an extent tantamount to seller’s own individual loss, but it happens to an extent signifying win-win sales, both for the buyers and the sellers.

Today real estate properties are overpriced. As a result, potential buyers don’t feel inspired to venture their hard-earned money into real estate. Moreover, the overprice causes sellers suffer loss considering the result of piling up inventory. If the preliminary step to correct price of residential/commercial project is not taken, the end result of poor sales of the property is bound to occur.

After all, healthy sales are the result of affordable price that buyers find accommodating to their budget. No buyer can afford the cost of a new home that goes beyond the level of his ready-made budget.  It is therefore this reason that the affordability is the concept of ultimate salesmanship in real estate, and this the core focal area for builders and real estate players which needs to be exercised with caution.

…even RBI’s governor seconded price correction in real estate.

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Raghuram Rajan, the governor of the Reserve Bank of India (RBI) on August 2015 said that the real estate players should bring down prices rather than sitting over their unsold stock. He said the price reduction will pave the path for affordable lending norms for home loans, a very strong factor to boost up the sentiment of fence-sitters. He also indicated positive sign of country’s economy picking up speed, which means – if the diversified measures, including price correction, are to be allied to boost up sales volume of stock, sign of growth uptick in real estate will emerge.

What should real estate do to bring down property prices?

The real estate bubble will burst to flat if the price of the properties is not brought down.  And, this is not the responsibility of the government alone, but builders, CREDAI members, and everyone who is directly or indirectly associated with realty, should shoulder this accountability.

However, the important question is – what should realty do to bring down property prices?

First of all, builders have to bring down the prices of their unsold stock. With that, I mean to say that I agree with statement of Raghuram Rajan invoking builders to reduce price of their inventory. He is right that if the sentiment uptick in real estate market is to be brought in, realty can’t afford presence of costly properties.

There has to be a way, a better and win-win strategy, in order to put this to an end.

That said, builders need to relax price on their inventory to an extent where potential buyers feel confident to purchase the property.

India is still dominated by people hailing from middle class with moderate income backgrounds.  We are not talking about increasing the sales volume of ultra-luxury or highly premium luxury properties dedicated to the exclusive buyers. We are talking about how prices of the properties can affect the common buyers who belong to the middle class.

This is not the era of year 2002-2007 when the prices in realty took upward turn backed by improved economy, controlled inflation and urbanization drive taken by government. Price and other allied factors will collectively pronounce decisive growth in realty in India.

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