Hope Floats...

Last few months have seen a lot of volatility in the property market especially residential real estate segment due to a combination of factors including exorbitant prices, high interest rates, overleveraging by developers, stalled projects as a direct result of liquidity crunch, demand-supply mismatch and a huge inventory of unsold homes. However, after the dark clouds, there is a silver lining over the realty sky, raising hopes for both property developers and consumers.

Today, the real estate landscape has changed considerably with the once investor-driven market completely turning out to be an end-user market. There has been substantial drop in both property prices and the home loan rates. Together with that, the attempt by the developers to restore the shattered confidence of the home buyers has contributed to bring some sanity and stability to the market that is price and product sensitive.

There has always been a good demand for right product at right price. This demand was however not being met, resulting in sharp drop in home sales. But now the developers have realised the genuine demand for affordable housing. As a result of this, developers as well as housing finance companies have started getting potential enquiries with large number of first time home buyers entering the market.

By now, it's well known that price cuts and lowering of home loan rates alone are not able to spur sales. What's needed is to restore the shattered confidence of property buyers. And it’s heartening to see that developers are now taking steps to win back the confidence of customers. They are not only committing timely completion and delivery of their projects but some of them are also offering protection against any further fall in prices.

Also, considering that demand-supply mismatch had proved to be the bane for the real estate, National Housing Bank's move to set up a Residex (an indicator of property prices) and RBI's plan to come up with the Housing Start-Up Index (a barometer of future housing demand) are set to revive the market. These reform measures will facilitate builders to do realistic number of projects as per demand and help consumers take informed decision about investing in a particular location. Not just that, these initiatives can really help check the formation of a property bubble of the kind which led to the recent real estate bust.

The other significant real estate reforms planned by the Housing Ministry, like providing affordable housing to the masses, ensuring timely delivery of projects and to protect property consumers from frauds will have a desired effect in giving the much needed momentum to the sector.

And with the consumer-driven Indian economy set to bounce back in the next financial year in response to fiscal and monetary policy stimulus and abatement of recession in the international economy, real estate sector is poised to pick up pace in the coming months.