LOAN SCENARIO
Visible change in the market
SRIKALA BHASHYAM
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Many may wonder whether they should jump into the bandwagon of buyers
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Not often do you find sellers chasing their customers with goodies and discounts. But then the current economic environment is not a usual phase and hence, for the first time in many years, you have seen some unusual things. For instance, property prices which generally knew only one direction have begun to move in the opposite direction and you have builders packaging property with cars and holiday packages. Needless to say, the current environment is sure to make many wonder whether they should jump into the bandwagon of buyers.
As you are aware, the property sector has entered a new phase with builders more willing to chase buyers and pricing their properties affordably. Today, buyers don’t have the fear of prices going up once they leave the builder’s office, which was the case a couple of years ago. On the contrary, sellers are willing to cut down prices with little persuasion. Surely, this is the best time to be a buyer of property.
The change in sentiment has been a result of a number of factors. To begin with, the acute liquidity crunch faced by the developer community has squeezed the demand. The fall in demand, as you are aware, is due to the change in economic environment — from boom time to slowdown in a matter of six months.
The swift change in mood has also weeded out the investors from the property market and those who are looking at property at present are buyers in the real sense. As a result, this provides a good opportunity for those who are looking at property for self-occupancy and if you are one of those looking at it for investment, you may have to keep a horizon of 3-5 years for good returns. Till the recent boom, property was never an option for short-term speculation but the excess liquidity and the buoyant economy had changed the scenario.
Be on the right side
The question many are asking is whether the current environment is apt for fresh investment in property and the answer is ‘yes.’ A number of factors are in place for the next cycle of uptrend though the current scene is at the beginning of such a turnaround curve. As you would have noticed, the realty companies have completely changed their business strategies and are keen on earning cash from sale of units rather than keeping units for superlative returns at a later date.
Not only will it help companies improve their cash flow but will also bring back the genuine investor who is not looking at dumping his buy in short term.
The change is already beginning to get reflected in the stock prices of realty companies which have recovered from their annual lows in the last couple of months. Also, buyers are getting (loan) help from banks which have begun to fund property.
However, even in the current environment, buyers need to exercise caution and should stick to projects which are closer to completion or already completed. While bigger builders have managed to tide over the liquidity crisis through different sources of funding (ranging from equity sale to private equity funding), the same cannot be said of small developers.
So, in the next few quarters, the industry is likely to see consolidation and some of the names are likely to fall by the wayside. As a buyer, make sure to be on the right side.
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