Is Property In India Still Not Affordable Enough?
Developers Macklowe Properties Inc and CIM Group had high hopes from this one. Their project, 432 Park Avenue at 57th Street Manhattan, was going to be the "tallest residential tower in the western hemisphere", joining the league of iconic buildings that dotted the New York skyline. In a 2013 review, Bloomberg termed the structure "by far the most important building in New York" by design architect Rafael Vinoly. This project was going to be a "new type among the history of skyscrapers" which would redefine luxury.
"The residences and amenities at 432 Park Avenue are serviced by a handpicked team of over 40 experienced professionals with a keen and refined understanding of luxury living. They bear a collective wisdom from years of service with the world's finest residential buildings, five-star hotels, and premier concierge organisations," the description at the official website of the project said.
Unfortunately, things have changed since 2013. According to a recent Bloomberg report, “buyers who signed contracts and completed those purchases this year got price reductions averaging 10 per cent”.
- Initially priced at $76.5 million, a penthouse on the 88th floor of the skyscraper was sold for $60.9 million recently, at a reduced value of 20 per cent.
- A full-floor penthouse on the 96th story, listed for $95 million in the beginning, was sold for $87.7 million in September.
- A 3BHK apartment at the 73rd floor was sold for $30.1 million, 11 per cent less than the listed price. Another 3BHK at the 82nd floor was sold for $18.6 million, a 14 per cent markdown.
That is not all.
“The recent sale prices at the tower — usually ending in odd, non-round numbers — also suggest the developer is covering those buyers’ transfer taxes and other fees,” Bloomberg quoted appraiser Miller Samuel Inc as saying.
What is triggering this reaction?
"Every building is implementing some sort of negotiability… It’s a sharp change from peak new development in 2014, when there wasn’t that opportunity for buyers," said Miller.
"As new high-end projects mushroom across the skyline, developers of ones that came to the market earlier are cutting deals to unload units before competition gets even more heated," the Bloomberg report adds.
Here in India, a stalemate continues while worried spectators watch with keen interest who will blink first, developers or home buyers.
PropTiger DataLabs figures show sales across major cities of the country are consistently declining while property prices remain stagnant. According to the PropTiger DataLabs report for the second quarter (Q2) of the financial year 2016-17 (Realty Decoded Q2'FY17), developers across the nine cities have been "reluctant to reduce prices" while they made the best of their efforts to sell off the unsold inventory.
According to the report: "From spot discounts, flexible payment plans, waiver of registration, stamp duty and other charges to free white goods, gold coins, luxury cars, buyers across the country are spoilt for choices this festive season. This is coupled with developers focus on execution and launches only with approvals is expected to bring the fence-sitters into market."
On the other hand, when compared to the previous quarter, new launches saw a 14 per cent spike. This means increasing competition, but despite that, developers swear there is not going to be a price cut at a time when they are hard-pressed for liquidity and a large part of their investments are stuck. Developers body, Confederation of Real Estate Developers Association of India (CREDAI), recently declared there was "no question of drop in the prices of the houses".
According to trends captured by PropTiger DataLabs, home sales figures in Millenium City Gurgaon declined 72 per cent in October on an annual basis. Property prices, on the other hand, increased one per cent during the same period.
If the experience of global developers is any indicator, property in India, especially in the luxury segment, might also be headed for a price reduction. Other discount offers seem to not be much of a help.