The froth is coming off

Sonal Sachdev writes on stagnant property prices and the impact a new project has on existing ones

April 03, 2015 03:40 pm | Updated 03:40 pm IST

Photo: Vipin Chandran

Photo: Vipin Chandran

It is finally happening. Property prices that had soared and stayed stubbornly high in certain markets despite the decreased appetite for deals are finally dropping. After refusing to budge from their pricey demands, sellers are finally coming to the market to negotiate exits. These are mostly investors, who have seen good appreciation in their investments over the past years, but after failing to strike deals at peak rates, that were regarded as going rates, they are now looking to liquidate their investments and realise the gains.

The fact that property prices in several high appreciation zones of cities have stagnated in the recent past has given rise to anxiousness that some of the gains of the past might start to erode. What has been most worrying is, despite putting properties on the market for some months, many investors have found few serious buyers. What’s more, most prospective buyers aren’t willing to pay rates even remotely close to the expectations of sellers.

That developers are aggressively pushing new projects with big discounts and attractive financing schemes isn’t helping matters for sellers of existing properties. The biggest plus for existing properties is immediacy — buyers can move in as soon as they seal the deal. However, with the introduction of newer amenities in upcoming projects, the old stock in many cases is looking dated. Smart homes with biometrics, climate control, et al, make developments completed just a few years ago look like projects of a bygone era.The degree of obsolescence is another big factor weighing on existing stock, especially since a large number of residential societies are unable to get all their members on board to invest in upgrades to keep pace with the times. This has made investment in old stock tricky. There is a possibility that with new projects coming up, a temporary perk up in valuations is seen, as the locality starts acquiring a different feel. However, in time, rates may drop as buyers prefer paying a little more to stay in modern developments in the area. Given this, swapping your existing home for a more contemporary dwelling may not be a bad option in the long run.

Former Editor, Outlook Business and Executive Editor, NDTV Profit, the writer is a personal finance expert. Mail him at propertyplus@thehindu.co.in

0 / 0
Sign in to unlock member-only benefits!
  • Access 10 free stories every month
  • Save stories to read later
  • Access to comment on every story
  • Sign-up/manage your newsletter subscriptions with a single click
  • Get notified by email for early access to discounts & offers on our products
Sign in

Comments

Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.

We have migrated to a new commenting platform. If you are already a registered user of The Hindu and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.