Builders, 2019 Is The Time To Walk The Talk
Highly unreasonable are those guides who preach prospective homebuyers to get emotions out of the way and apply only and only logic when they make the biggest purchase of their lives. Without questioning the merit of the advice, it is safe to say that most of the buyers would never be inspired to make such a move if they were not driven by their emotions. In fact, even those who pride themselves of being in the game to simply flip properties and make money would be overweening if they claimed they were above all emotions. Even if it is paradoxical, and we don’t say it is, emotions will continue playing the lead role in home-buying stories, money playing the character that has the capacity to make or break the plot notwithstanding. It is in this context that we should analyse the performance of India’s real estate market in 2018 and its future in 2019.
It’s only words!
Even though sales numbers indicate good times a-coming, homebuyers are a long way from overcoming the dilemma they feel in a market, which has attracted a great deal of negative publicity in the recent past. However hard it tried this year to dispel the negativity heavy words such as ‘insolvency’ brought to the sector by countering them with light words such as ‘affordability’, India’s real estate could do only little to achieve that design in 2018.
Amid a rise in home sales numbers during the year in nine key markets, no solution is in sight for lakhs of homebuyers in the national capital region alone where the country’s top court is striving hard to find a solution to three super-complex cases pertaining to realtors Amrapali, Jaypee and Unitech. Even as solutions to these cases remain elusive, new cases of builders going insolvent are cropping up one after another. That the government has awarded on homebuyers the status of financial creditors in insolvency proceeding through a change in the insolvency code is also not making things any better, sentiment wise. The fact of the matter is that one invests in an immovable asset to get a property and not to get dragged in long-lasting insolvency proceedings. Even if justice is delivered to every homebuyer at some point, it would come quite late and at a price most of them may not be even capable of paying.
However, the fact that there are forums such as the Real Estate Regulatory Authority (RERA) and the National Company Law Tribunal (NCLT) they could approach to get their grievances addressed has been instrumental in boosting buyers’ confidence, to some extent. Data available with PropTiger.com show home sales in 2018 increased 23 per cent when compared to 2017 on improving buyer sentiment.
If developers made the grave mistake of assuming they could dethrone the consumer from his king’s seat when all was thriving in India’s real estate and buyers made a beeline to book their dream homes, they can only repent now. Unfortunately, some of them will have to compensate for making that mistake by losing their very existence and stand no second chance to correct the situation.
Anyhow, “cutting” is oftentimes seen as the ready solution for all problems. Promptly then, some 'slashing' moves was made to improve buyers’ sentiment. If home-buying decisions were purely driven by ‘affordability’, home sales would have increased substantially in the first of 2018, when interest rates were at a record low and builders were showering discounts in a market where rates have largely remained flat in the past five years. Since that did not happen, it is safe to say that in a positive market, where the buyer is certain he will get what he wants and when he wants without any fears of losing money, he would not shy away from paying a little more. They did exactly that when rates were rising during the real estate boom in the start of this decade; till then, buyers were unshaken in their confidence in real estate. If developers expect their condition to improve in the New Year by regaining the lost confidence, they will have to show greater seriousness in delivering what they promised. And, more importantly, they will have to be acutely watchful of their words lest they fall to making claims that they would not be able to deliver.
If they are working hard now to complete their ongoing projects (around 8.78 lakh units are likely to be delivered by the end of 2020), India’s now-watchful builders are also exercising caution in launching new housing projects — new launches in nine markets are likely to fall 22 per cent y-o-y; in 2016, they fell 43 per cent. The numbers are likely to fall further in 2019, when the country goes to polls. That is a wise step since it is high time India’s builders walked the talk.
A word to the wise! Since other sources of funding might be drying up amid a liquidity crisis in non-banking finance companies, homebuyers are realtors' only hope.