Amid slowdown in sales marked by rising property prices and high home-loan rates, home buyers are increasingly opting for ready-to-move properties to ensure safety of their investment. Vinod Behl takes a brief look at this trend that is turning into a torrent …
Large scale project delays and delivery defaults have been largely responsible for home buyers’ growing penchant for ready-to-move properties. Th ough most of these delays are due to adverse market conditions resulting in slowdown in sales, there are in some cases deliberate delays by cash-strapped developers. Th e impact of these delays is clearly visible when we look at the huge (44 percent) gap that exists between the committed supply and actual supply in the last fi ve months of the calendar year 2013.
Large scale delivery defaults have shaken the faith of home buyers. Despite assurances, customers are not convinced, resulting in slow offt ake of homes. Th is gets refl ected in rising inventory of unsold homes, which has risen to almost 5 percent in the top seven cities during the January to March quarter of 2014. And as things stand today, it will take developers close to two and a half years to dispose off the surplus housing stock at the current rates of absorption. Today, the buyer wants to play safe and secures his investment even at the cost of paying a heft y premium associated with ready-to-move properties. It is precisely because of this reason that there are few takers for newly launched projects, despite their high appreciation potential while there is hardly any market for pre-launch off ers. Th at ready-to-move in properties are increasingly becoming the preferred choice of home buyers is clearly evident from the signifi cant rise in the number of inquiries by potential home buyers and listings on leading property websites. Several developers have reported about 30 percent more sale of their ready-to-occupy homes, compared to the sale of under-construction homes. So while for property buyers, safety of investment weighs heavily on their minds, for cash- strapped developers, ready-to-move homes are proving to be a boon in terms of improving their cash fl ows.
The growing popularity of ready-to-move homes can also be attributed to a number of advantages they have. Unlike under construction homes, home buyers are not unsure about the quality of construction. Also the customers get over the problems of builders duping them by not providing the promised amenities. Moreover, there is no price escalation as in under-construction properties, on account of the cost-escalation clause of developers increasing super-area during construction. Buyers are saved from facing ambiguity about super-area and carpet-area and they know precisely what they get and what they pay, whereas in under-construction property, developers tend to increase the number of fl oors, change the layout plan, raise super area or reduce the green area etc. Moreover the higher price paid for readyto- move or close to possession projects can well be off set by other benefi ts like various tax advantages. Th e bottom line is that for immediate need, it makes sense to go for ready-to-move-in homes and these are best for end-users who are already burdened with home rent. But if one is looking for higher returns and has some risk appetite, under-construction property is the best bet as it provides higher ROI.