MANGALURU: The Confederation of Real Estate Developers Association of India, Mangaluru has downplayed what it terms is ill-founded analysis of non-real estate players on a major slump in prices of apartments, houses post demonetization. Describing observations of economists and experts including the media on the issue as one out of sync with real estate sector fundamentals, CREDAI, Mangaluru said the worst of the news for the sector is already out.
Describing reports of house/apartment prices dropping by 30% or more, land prices dipping by 50% or more and GDP growth coming down and unemployment increasing as myths, D B Mehta, president, CREDAI, Mangaluru told reporters that apartment prices might see a small decline in initial stages of demonetization more out of liquidity issues. Demonetisation will reduce land prices by 15% but not bring down the actual construction cost or the taxes.
Pointing that taxes contribute more than 30% of total cost, he said land prices accounts for only 30% of cost of apartments in a tier II city such as Mangaluru. The decline of prices of apartments will be minimal of around 5%, he said adding the city unlike the Metros is not an investors market with buying in realty here mostly by NRIs and non-resident Mangalureans more for future use. In metros, 65% of buyers are actual end users and the rest investing in realty, he said.
The other factors that could only end up pushing the realty prices in the near future, he said is the passage of Real Estate Regulation Act which will only add to compliance and legal costs. Besides, there is no clarity on impact of GST on costing of realty sector, he said. Even the land holders in the city are sitting on their ancestral, family or personal land and are in no mood to sell the same, he said adding even a mini survey carried out by CREDAI has confirmed this.
Averring that black money component in real estate has helped reduce cost to buyer due to savings in taxes that builders passed on to consumers, Mehta said real estate market has perfect competition and is plagued by tremendous over supply of finished stock. With legal transaction now becoming the norm, Mehta said there will be additional cost of by way of taxes which will increase the cost and price. Primary market sale by builders even otherwise is by way of cheque, he said.
Reiterating that the best way to invest is to buy low and sit tight, he said this is the right time when the customers should go for bargain hunting and buy apartments of their choice from a CREDAI member builder. “This period might last till March 2017,” he said. With fewer new project launches, demand supply situation will change very fast. Within a year, three years of ready stock will look like 18 months stock with lower new supply and increased off take, he noted.
Credits ET Realty