Buyers negotiate prices as demand, property value dip

There was no scope for further correction in prices unless a builder wanted to incur loss.

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S. Shanker

Mumbai, March 8

Dwindling demand and falling property prices appear to have created a platform for buyers to negotiate prices with developers, which till a year ago was unheard of.

Real estate prices have seen a correction of 15-25 per cent. This apart, a further 5-10 per cent reduction is reportedly happening during negotiations between builders and buyers.

However, a uniform price correction pattern cannot be mapped as correction hinges predominantly on factors such location, demand, supply and the developer’s financial ability to weather the storm in the current economic slowdown.

Ruling out a further price correction in the near term, Mr Anand Gupta, General Secretary, Builders Association of India, said already developers were reducing prices during negotiations.

There was no scope for further correction in prices unless a builder wanted to incur loss, he said while conceding that there were incidents of reduced pricing to facilitate investors to exit.

“No one would want to sell below production cost and no bank funding can be got once that happens,” he said.

Freeze

Mr Gupta sees a sedentary market with stagnant prices over the next six quarters, before sales starts kicking in. Once the economy picks up and the prices are seen steady, sales will happen, he said.

Mr Sanjay Dutt, CEO-Business, Jones Lang LaSalle Meghraj, said the mismatch between supply and demand was such that even if developers reduced prices in the luxury segment, it would still be outside the ambit of a majority of home seekers.

Centrum researchers said high-end home prices in Mumbai are down from the peak values by around 20 per cent and developers were willing to negotiate a further 10-15 per cent once someone exhibits intentions to buy.

Mr Dutt said there has been a correction of 30-40 per cent in the secondary market of central Mumbai, and of 10-15 per cent in the primary market. In the suburbs, developers of some projects are holding on, while others have come down by 10-15 per cent.

Price Corrections

In Bangalore, the primary sales market saw a ray of hope when Sobha Developers officially came down on their asking rates by eight per cent about two months ago. However, no other developer has overtly announced any reduction, though reductions do take place during direct negotiations. This is despite developers seeing a 70-75 per cent drop in sales.

In Delhi, quotes on the secondary residential market have come down by 7-8 per cent with a further reduction of 3-4 per cent known to happen on actual negotiation. The highest incidence of price corrections has been in the suburban parts of NCR.

In Pune, price reductions are still largely a prerogative of individual developers. Those who have sold 85 per cent or more of the flats in their projects are holding on, while dips are increasingly evident among those who have sold 50 per cent or less. Overall, there has been visible softening of rates by 15-20 per cent per cent.

In Kolkata, there is no softening of prices in the primary sales market. Even negotiation with an intention to buy makes no impact. Most transactions are happening on the secondary market, where a substantial rate drop of 20 per cent is noticed.