Despite more than a 20 per cent fall in prices of houses in new projects, a majority of home buyers are looking for a further price reduction, a survey by an international brokerage shows.
Nearly 90 per cent home buyers in Mumbai, National Capital Region, Bangalore and Hyderabad, where property companies like DLF, HDIL and Unitech have launched their projects with 20-25 per cent price cuts, expect prices to fall further by around 20 per cent, the survey says.
Home buyers, faced with prospects of dwindling incomes and job cuts, are yet to make up their mind on buying new homes despite the price cuts and lower interest rates, the survey, conducted by CLSA, has found. The survey was carried out among 140 prospective buyers for four projects in four cities where developers have dropped prices by 20-25 per cent.
Though DLF, HDIL and Unitech have sold nearly 1,000 apartments in their new projects in the last one month, a fatigue will set in among buyers, who expect prices to fall further, the brokerage has said.
"With more developers joining the price war, the potential buyers will get used to these new prices. The novelty of attractive pricing being lost, consumers will start demanding bigger discounts untill economic conditions start improving," CLSA analysts Mahesh Nandurkar and Abhinav Sinha said in a report based on the CLSA Housing Buyer Survey.
Due to economic boom and lower interesr rates, home prices more than doubled between 2004 and 2008 in cities such as Mumbai and NCR. But as stock makets crashed and economic slowdown deepened, prospective buyers started deferring their purchases, which led to 70 per cent drop in property sales in the early months of this year compared with the corresponding period of the previous year.
Developers, however, maintain that while the initial response to the price cuts has been encouraging, there will always be buyers who will sit on the fence and wait for further drop in prices.
"We are cutting prices wherever possible. We can't talk about the future," said Hari Pande, deputy general manager, HDIL.
Consultants also endorsed the fact that prices needed to go down further. "I expect prices to correct at least 35 per cent from the peak. Buying will not happen immediately but come in a slow and steady market. Some buyers are still waiting whether prices will come down further," said Akshaya Kumar, chief executive of Park Lane Property Advisors.
Said Sukethu Mody, president and COO of Coldwell Banker Goodwill Consultants, a realty consultancy: "Prices may not fall much from here. Sales should pick up now."
The CLSA study showed that at least 75 per cent prospective buyers in these projects were aware that prices had been dropped.