By Akash Pharande, Managing Director – Pharande Spaces
Increased demand for real estate tends to lead to price hikes eventually. Even when demand was low for a long time but has begun to revive, developers avoid increasing prices because they want to foster the new demand. There was a 3-year-long market slowdown before the Covid-19 pandemic, and the pandemic itself was a difficult time for everyone – not least of all for homebuyers.
Now, housing demand has returned as more and more Indians want to get rid of all uncertainty and move into their own homes. The rental trap is threatening and undesirable in a time of uncertainty, and good homes by strong developers and in good locations are selling like hot very well.
This itself is enough to kick-start a price rise, but developers’ overall construction cost has also gone up by at least 35%. Even before the pandemic and the Ukraine debacle, cement and steel prices skyrocketed. Today, prices for everything have increased, with inflation hitting the double digits. Developers bore the additional costs for as long as possible, but now have no option but to pass on some of the burden to homebuyers.
What Should Homebuyers Do?
Over the last 2-3 years, end-users have primarily driven the market. It is not typical for end-users to try and ‘time the market’ to get the lowest prices the way investors do. The pandemic had the unexpected effect of boosting home buying sentiment, and end-users continue to buy homes. Will demand drop away now that prices will start increasing?
This is a popular myth today, but prices are not the real reason why Indians are buying homes today. In fact, all prominent property consultants have confirmed that homebuyers prefer bigger, pricier homes in the more expensive projects by reputed players. Even investors, who had stayed away from the market for a long time, are now becoming active again because of the resurging demand for homes.
Yes, home prices will start to increase now. But real estate is, by nature, an appreciating asset class, and the homes people buy today will gain in value over the years. The highest demand is from end-users who are not guided by an investor philosophy but by a genuine desire for homeownership. Such buyers still have the option of looking for the most attractive deals on the best properties and actively participating in this very desirable growth cycle.
Should You Negotiate – And By How Much?
In the souks and bazaars of the Far and Middle East, bargaining is not only a normal but a standard practice. Shopkeepers there do not look down on customers who bargain on the stated price – they respect them. To an extent, this is also true of the Indian property market.
You can and should negotiate the price with the developer’s sales team. How much depends on how well you have done your homework on the project and the developer. Obviously, if flats in the project are ‘flying off the shelves’, there is less scope for bargaining – but it still exists. You will not be disrespected for suggesting a slightly lower figure. Customers who bargain on the price are generally genuinely interested buyers whom salespeople take seriously.
So, the first thing you should do is show serious intent to buy. Developers’ salespeople know when someone is interested in their project or is only window-shopping. Even bigger branded builders who are seeing sufficient demand for their products and are not desperate to close deals respect a serious customer.
If a project interests you, arrive at the negotiation table with a reasonable discount expectation (between 2-3%) and your cheque book. Offer to make a down payment right away if you get a good deal. Be who you really are – an end-user, not an investor. Investors often buy several units in a project at once and can negotiate scale-based discounts.
Is This A Good Time To Buy A Home?
For end-users (and especially first-time homebuyers), it is an excellent time to take the plunge, and marginal price increases should not deter them from acquiring an asset that will serve them well for many years and simultaneously appreciate value. But first, be sure that the chosen property is right for you.
Even if you’re not strictly buying for investment, you want the property to appreciate further in the future. Smaller homes are no longer in vogue, and neither are properties in costly central locations. The highest demand is for amenities-driven projects such as integrated townships, which guarantee a top-of-the-line lifestyle quotient.
Future appreciation will not depend on the lowest price you can get today but on the property’s overall quality. Ensure that the property you buy is future-proof in location, construction quality, and amenities and facilities.