By: Ravi Sinha
Track2Realty Exclusive: If you think buyers’ market is a myth in Indian real estate, probably you have not been exposed to Coimbatore real estate. Furthermore, if you feel buyers’ market is an off shoot of crisis in the property market where the developers have gone belly up to go for distress sale, again experience this as a myth and not reality in Coimbatore property.
As a matter of fact, Coimbatore realty market is so different from many other over-heated and over-glorified real estate markets in the country that an outside view may not do justice to anticipate or understand the dynamics and inherent reality of the real estate market of the city in general and housing market in particular.
Interestingly, Coimbatore property market is a buyers’ market and what makes its positioning all the more unique is the fact that that this realism has been maintained so by none other than the developers themselves. It is debatable how far this has been kept a realistic market by default of market dynamics and to what extent it has evolved by conscious design of the developers.
What can be vouchsafed in Coimbatore market is the fact that understanding the geographical market, its sociology, key demand drivers, spending pattern and many other realistic fundamentals, the developers in Coimbatore have neither gone into speculative appreciation of the property nor there seem to be greedy investors on prowl to create artificial demand and hence artificial appreciation.
One of the reasons of such a realistic assessment of the local market is that most of the developers have deep roots in the respective micro markets of the city, and have not ventured into this market for expansion. This makes even the developers from the neighbouring market cautious here and since the market across South India is not driven by speculation, the balancing act has not been very tough here.
Facts speak for themselves. Even at a time when the property market across the country was at its peak during 2002-07, leading to unrealistic appreciation of more than 100 per cent, Coimbatore property was appreciating at a healthy yet stable rate of 20-40 per cent on year-on-year basis. This appreciation again was subject to the pockets of economic activity and hence very realistic. The supply was fuelled in right proportion of demand throughout the bull phase that made the market resilient during the bear phase.
And hence, when the property markets in other parts of the country nosedived following slowdown looming large post 2008, Coimbatore property only cooled down a bit without any visible sign of unrest or distress. Data from National Housing Board’s Residex show that the city’s index has risen from its base value of January 2007 to 184 in January-March 2013. This has been quite moderate compared to a rise to 310 for Chennai during the same period. This only reflects the realistic level of demand-supply cycle even from non-speculative standpoint of the South Indian property markets.
Purvankara which has launched a couple of projects in Coimbatore market maintains very much like all the South Indian markets Coimbatore is a realistic market that carries lot of potential and there is no speculation over here. Purvankara Group CEO, Jackbastian K Nazareth says prices are very much affordable here and since the affordability has not gone beyond the aspiration level it remains a buyers’ market.
“Our experience with the two projects in the Coimbatore market has made us believe that it is genuine end-user driven market. Land supply is though limited, yet land cost is also affordable. There is no mad rush to launch more and more projects here. The average projects are selling between Rs. 2000-4000 per sq feet. The developers are also conscious of the fact that the moment they increase the price beyond Rs. 5000 per sq feet, that will deter the buyers,” says Nazareth.
Since the peak cycle of property appreciation the momentum has not lost in the city’s property market which is quite stable by any economic fundamentals, be it capital appreciation or the rental yield. At the same time, the growth of property market has also been at par with the growth of economic activity in the city. How many property markets in India can claim this at a time when lopsided demand-supply cycle has brought the inventory level all time high everywhere? And that makes Coimbatore a unique property market.
Arvind Nandan, Executive Director, Cushman & Wakefield agrees that Coimbatore is a realistic market. According to him, the supply is so restricted and demand so real that there is hardly any scope for speculation. And hence, Coimbatore is an equal opportunity market, very much like the rest of South India but distinctly different in the sense that it is catering to neighbouring markets as well due to thriving IT/ITeS and senior living due to better climatic conditions.
“The moment you flood the market with inventory and then to make the business cycle moving you start luring the speculative buying, the property market loses momentum. It may suit some of the developers in the short term, but pinches all of them in the long term. That is a missing element in Coimbatore market and hence I would not even call it a completely buyers’ market. The fact is that it is an equal opportunity market that is reasonably rewarding for developers as well,” says Nandan.
Since the supply is restricted in Coimbatore, so is the inventory which is a major challenge in other markets. But that is not an issue over here, nor any major issue of delay in delivery. Moreover, the developers are well grounded to launch the custom fit apartments that get absorbed. There are no high-end or super luxury launches and the residex movement is in sync with the overall consumer spending in the city.
In conclusion, Coimbatore property is an intelligent investors’ market that keeps speculators away. Analysts, therefore, call it more of an equal opportunity market than a buyers’ or sellers’ market. Reasons: it is neither a market that will give unreasonable appreciation, nor will crash or correct to pinch the buyers.
Now that may not be music to the ears of those greedy investors who believe in high risk and high return business cycle, but is definitely a signature of authority to the end-users who part with their hard-earned lifetime money.
The resilience of Coimbatore property against the cycle of boom and bust makes it one of the most realistic property markets across the country. The question is whether other markets sitting over huge inventory will follow Coimbatore property trends to create a realistic market?
