Bangalore Real Estate Trends

After the recession of 2008-09, India has a new story to tell the world,in real estate. Affordable homes,that hit the market in early 2009, was just the product many buyers had been waiting for,says E Jayashree Kurup

Over the last few months,a new and distinct trend has emerged - that of rising demand for luxury homes.This was a segment that had emerged as an attractive proposition for developers in 2006-07. Dozens of projects were launched and sold. However,there is a qualitative shift in the buying patterns,as well as the buyer segment,for luxury housing.

Earlier,investors comprised a large segment of the buyers. They bought at the launch and then exited the project after paying a couple of installments. Completion of projects was not the primary concern. Value appreciation was the biggest concern.

However, today's buyer is neither an investor nor a first-timer. He is the middle-to-senior level executive or businessman who has weathered the economic storm,emerged either unscathed or just marginally singed,but with renewed confidence in his buying power. It is still too early to comment on the trend with any degree of certainty but it can safely be said that this buyer is an end-user who is negotiating the sale of his property that was once adequate but currently inappropriate to his lifestyle and aspirations.He is probably in his late 30s or early 40s and has a good 10-15 years of working life left to pay off the loan he is securing to buy that luxury home.

So,what happened in this intervening period
To put it in a nutshell,the downturn happened.During this period,the developer did nothing more than what he had probably done for over a year since the wild boom of 2007-08. Developers had been routinely launching premium projects,selling many units to underwriters who would sell on to short-term investors and then not really be in a rush top develop. As a bulk of the buyers were investors who did not really mind if the project was delayed,and since occupying that piece of property was never their concern,there was no real pressure on developers to build and deliver. In fact,a slow pace of progress actually helped the underwriters who got more time to sell the project.

Only projects that were nearing completion would be picked up by the enduser,who could have been even the seventh or eighth buyer in the chain - he entered at a higher price but remained invested and wanted to live there. Then came the global downturn and the Reserve Bank of India's move to tighten the screws on lending to the real estate sector,which was perceived to be highly speculative.Soon developers found the population of buyers dwindling as they did not choose to spend their money in an uncertain market,even as investors turned hostile fence-sitters.

This prompted them to start building instead of sitting idle or launching new projects. That led to some luxury stock hitting the market.Then came the tight money situation where many defaulted on timelines. With an uncertain job market where professionals across segments lost their jobs, the buyers turned sellers and some amount of panic selling happened.

Today,the market has completely changed. The survivors are now willing to spend on the luxuries of life. Those developers whose projects continued to clock progress are winners. The only assurance the buyer of today understands is delivery on his own terms.

So,is there a real estate bubble building up again
It actually depends on the developer community and to a large extent,upon the policymakers as well. During the wild run of real estate in 2006-08, all developers were building in the premium segment only. That market is a tangible one, accounting for over five percent of the market. But practically every developer chose to serve the five percent ignoring the needs of the rest 95 percent.

The government's policy directive that loans below Rs 20 lakhs will get tax incentives prodded many developers to build in this segment. Most developers put their products where the lending was most active. The onus is on the policymakers to keep watching and moving, to rein in market forces to meet the demands of the majority, as every market segment gives out signals. The policymaker's antennae have to be tuned to these changes to catch the right signals.

Note: Only projects above Rs 2.5 crores in Mumbai and above Rs 50 lakhs in other cities are included.

_{Source: Times Property Dt: 13-8-10}