By: Ravi Sinha
Track2Realty Exclusive
The over-heated Mumbai property market is taking its toll on the property transactions and sales in Mumbai property is the lowest of the six major cities across the country. According to reports, over the last one year leading to December 2011, residential sales in Mumbai have dropped by 28 per cent. On the eve of traditional Marathi festival Gudi Padwa the question doing the rounds in Mumbai is whether the festive season, known as auspicious time to invest in property, revive the real estate market. Since a large cross-section of Mumbaikars tend to link property acquisition with auspicious dates, activity levels on the property market increase visibly in this period.
However, the wishful answer of developers to prospects of property market revival indicates different and market dynamics indicate otherwise. The property seekers are clueless as to whether the Mumbai property will ever bottom out. And hence, this year Gudi Padwa season seem to be juxtaposed with some interesting market dynamics. As per the data available with Track2Realty, the real estate market tracker, the Mumbai property market in general, and its periphery locations in particular, are sitting over huge inventories that can take care of another five years of property demand, keeping in mind the average transaction rate in the city. The reluctance of the developers to cut down the price (there is rather upward swing) is making the market unaffordable for home seekers.
Will all this change this festive season or Gudi Padwa will also be of just symbolic relevance, the way last Navratra & Diwali witnessed last year. May be discounts, product repackaging and innovative ideas are needed in the Mumbai property market but prima facie it seems that not only the sales graph has nosedived, Mumbai realty even suffers from fresh ideas. No wonder, beyond wishful developers and reluctant buyers, comes the Gudi Padwa festival and market analysts are clueless as to how will Mumbai realty behave during the festive spirit.
A small sample survey by Track2Realty on the eve of Gudi Padwa festival shows it is more about confusion than affordability that is proving to be the bane of Mumbai realty. For instance, more than seven out of ten, 74 per cent, still believe that festivals are the best time to buy out the property. However, nearly nine out of ten among these property aspirants, 88 per cent, are not sure whether this is the right time to invest in property, given the fact that all the reports are suggesting a price correction upto 10-15 per cent is on the cards.
First time home buyers, 92 per cent, are emotionally more driven by Gudi Padwa spirit to buy a house, than investors who are active in the property market as mere traders with no emotional connect to festive spirit. Does it mean that the developers in Mumbai have failed to capitalise on the genuine property seekers who need right mix of discounts and product packaging to increase their sales conversion rate?
Shailesh Puranik, Managing Director, Puranik Builders agrees that many a time developers do announce some offering in order to complement the home buyers on this auspicious period. He, however, doesn’t agree that product packaging is needed to lure home buyers on this festival. According to him there has been a great awareness among the buyers today and most of the time it is the location, proper pricing, quality of construction and trust that attracts home buyers towards the real estate project.
“The recent years have been slightly tough for home buyers and developers. While rising inflation and interest rates kept home buyers away from investing in real estate, developers are also forced to continue their ongoing projects or previously approved projects. The approvals to the new projects are taking so much time in these days. The entire process is slowed down since last one year. However, the recent decision by the RBI of reduction in the CRR cut has indicated of bright days in the near future. This move is expected to help the buyers with reduction in interest rates. Developers will benefit by available liquidity in financial system. This is the only trigger for the Gudi Padwa at the moment,” says Puranik.
Atul Modak, Head of Kohinoor City also believes that if the product is good then packaging does not play an important role in decision making. A few recalls and word of mouth publicity does the rest. According to him, Mumbai market is picking up swiftly and Gudi Padwa will increase the pace further, since quite a few look at it as an auspicious day for a new beginning or booking a house.
The Question is what about the buyers’ sentiments in the wake of reports of price correction? “Such reports keep coming but if you compare the Mumbai real estate price since last couple of decades, you will find a steady increase in the rate. So even if there is correction, it hardly makes much of a difference to genuine buyers. India being an incalculably cultural heritage, we Indians follow most of the festivals sentimentally. If it has been a tradition in the family to make all the big ticket purchases on auspicious occasions, then it plays a major role in the property purchase decision,” says Modak.
Devang Varma, Director, Omkar Realtors & Developers, however, doesn’t rule out the importance of product packaging to lure home buyers on this festival. But he believes one-size-fits-all can’t be the solution and it would vary depending upon the target buyer category. Traditionally, developers apart from offering direct cash discounts have pushed holiday packages, memberships, automotives and consumer goods on such occasions.
“Any product packaging which is perceived as high value addition quotient should be customized as per target clientele and market conditions. On this Gudi Padwa also a certain segment of buyers who religiously follow certain dates/occasions for business transactions would definitely transact. In any case, the real estate business is not completely festive-driven but witnesses positive market sentiments,” says Varma.
Deepak Shah, MD, Sumer Group is more realistic in his assessment when he says that Gudipadwa is an auspicious day when buyers prefer to make transactions. It alone cannot lift the market but will certainly help in guiding the market trend. It will be decisive in how the market will move as people prefer to book properties on this day. Decision of purchasing property is a very big decision in cities like Mumbai and many factors play a vital role.
“Religious sentiment doesn’t play role in purchasing decision but the potential buyers like to make transaction or booking a property in auspicious times. Pricing and payment terms play the most vital role. Discounts may attract the investors but not the actual buyers as they go for an optimum deal i.e., best available property within their budget. So, opening projects around festivals for sale attracts more number of buyers than the regular season enabling the seller to release his maximum stock by way of bookings and token payments to ensure that his project will generate desired flow of funds. It has to do more with economic conditions than the festive spirit as it is not only an auspicious buying but a lot more is at stake,” says Shah.
Now comes the most important question on everyone’s lips—with the kind of price correction in Mumbai being projected by the realty consultants and analysts, will this Gudipadwa be under its influence?
Mayank Patil, a prospective home buyer echoes the market undertone when he says “I am on the lookout for a flat for the last 8-10 month and price correction is something that I find in media reports since then. However, my property hunt is witness to the fact that prices have only marginally gone up. I will definitely book my home this Gudipadwa if I get a decent deal.”
Will the Gudi Padwa break the jinx of Mumbai real estate is what everyone in the property market is talking about. Realtors are hoping for a booking windfall, something that will prove to be the beginning of realty market coming right on track after a couple of years of gloom. Though market pulse is not indicating this wishful thinking, but then indicators have misled the property market more often than not.
