Is this the right time to buy a house, invest in property or one should wait for the right time? Bombarded with a plethora of realty advertisements via mail, sms or phone one is tempted to invest money in property. But doubts cloud the mind and one wonders, what is the reason behind a sudden spurt in affordable housing societies? Is this another bubble waiting to burst or is this a ‘here to stay’ phenomenon? Which segment will yield greater profits? Bureaucracy Today spoke to Pankaj Renjhen, Managing Director, Jones Lang L’salle Meghraj, to understand the dynamics.
BT: After a bit of correction in 2008-09, property prices have stabilized again. Are they back at the 2007 level?
Pankaj: Yes, property prices have stabilized and they are back where they were in 2007. In fact, in some pockets, they have gone beyond it. The correction in the realty market was due to a downturn in the global economy. As a result, property buyers became cautious and withdrew from the market. But in 2010, property prices have stabilized again after good GDP growth figures and the availability of buyers in the market. Overall the prices have gone up in the range of 10-25%, depending on the feasibility of a project.
BT: Affordable housing is the name of the game for the realtor these days. Tell us about its evaluations.
Pankaj: Affordable housing or low cost housing was never the focus of private developers till 2006 to 2007 but the economic downturn changed everything. Though the buying power remained with the middle class, it was not ready to spend. Developers spotted the potential and in 2009-2010 a majority of them entered into agreement for the affordable housing schemes. The mantra is ‘volume not money’ in this segment. The percentage of profit is less but numbers matter.
BT: Numerous residential projects are being launched these days. Are these sustainable?
Pankaj: Most of the builders in the segment are moderately good, but a background check of a particular developer and his project is necessary before investing. A lawyer can be consulted to go through the papers provided by the developer.
BT: There was a general feeling that property prices were grossly inflated during the 2004-2007 period.
Pankaj: In 2004-2007 there was a mismatch between demand and supply which made property prices soar to an unsustainable level. There were more buyers in the market than the available supply of property. Now in 2010, property prices are high again, but they may not be sustainable. As and when the supply increases, the prices are bound to come down.
BT: There is an urgent need for an effective real estate regulator to control unbridled pricing by companies. Your Take.
Pankaj: Definitely, there is a requirement of a regulatory body ensuring the interests of stakeholders involved. The real estate industry is pinning hopes on the pending Real Estate Bill in Parliament. The Bill is expected to set standards and provide a framework for the implementation of housing schemes.
BT: Like the IT boom in early 90's, the real estate sector is the place to be invested these days. What are the growth figures the industry is looking at?
Pankaj: Very true. India is a growing economy and this explains the spurt in infrastructure projects the lack of which is a stumbling block. Real Estate is the foundation for growth and development without which a country cannot grow. We will continue to see immense growth in the sector.
BT: What kind of returns Real Estate promises from the investment point of view?
Pankaj: Well, that has to be calculated keeping inflation figures in mind. Leaving that hiccup, exceptional returns are certain in some segments. Be it retail commercial or residential property, all promise a good return.
