Buy or Rent? 10 Major Cities
Deciding whether to buy or rent? Here's how the math plays out for some of the nation's biggest cities, according to real estate site Trulia.
Figuring out whether it's better to buy or rent rests on three main factors: where you live, how long you plan to stay and how home prices compare to rents in the area.
Real estate website Trulia analyzed data from 100 major metro areas to help determine that last factor.
While markets vary wildly, prices are so reasonable and interest rates so low that buying is the better option in most of major U.S. cities, said Jed Kolko, Trulia's chief economist. Nationwide, home buyers who remain in their homes for three years will save an average of 19% over renting. If they hold onto their homes for 7 years, the savings advantage grows to 44%.
That means all of the initial transaction costs of buying -- the broker's commission, title insurance, legal fees and other closing costs -- will be offset by benefits, like tax write-offs and price appreciation. And those costs will become cheaper than the total costs of renting, which include insurance and agent commissions.
But the math is changing.
Home prices rose 7% year-over-year last month while rents went up only 3.2%, according to Trulia. "Buying is still cheaper than renting but the gap is closing," said Kolko.
San Francisco
Buy or rent?: Rent
After 3 years: Buyers pay 28% more
That keeps the housing market sizzling. The median price of homes sold during the last three months of 2012 was about $700,000, according to the National Association of Home Builders (NAHB).
While rents are no bargain either, it still takes at least five years before buyers can start reaping the financial benefits of homeownership, Trulia found. At that point, homeowners realize about a 5% savings over renting. After seven years, that savings advantage climbs to 19%,
New York
Buy or rent?: Rent
After 3 years: Buyers pay 11% more
This is the closest New York has come to being a buyers' market
in years. But for most city dwellers, the proposition only makes sense
if they have a lot of cash to put down upfront and are willing to stay
in their home for five years or more.
In the heart of the city, home prices are still stratospheric. A
modest two-bedroom apartment in Manhattan, for example, can easily cost
$850,000.
And while rents are among the highest in the nation, it's still
cheaper to pay a landlord than a mortgage. During the first three years
of owning a home, buyers will shell out an average of 11% more than
renters, according to Trulia.
After five years, the numbers turn in a buyer's favor. That's
when they start realizing an average 15% savings over renting, says
Trulia.
Those willing to look further afield, say in Connecticut or New
Jersey, will find many homes that sell for well below city prices.
During the last three months of 2012, the median price of homes in the
greater metro area was a much more reasonable $450,000.
Los Angeles
Buy or rent?: Buy
After 3 years:
Buyers save 3%
The buy or rent debate in Los Angeles is a closer call than in
most major markets. Buyers who stay in their homes three years have a
negligible savings advantage over renters, according to Trulia.
A lot has to do with where they live. Home prices vary greatly
around the Los Angeles metro area with values on the fashionable
Westside -- including pricey Santa Monica, Brentwood and Beverly Hills
-- as much as four of five times those of less in-demand, inland areas.
Like all other markets, the payoff for buyers becomes more
pronounced with time. After seven years, buyers will save 35% compared
with renting, Trulia estimated.
Boston
Buy or rent?: Buy
After 3 years: Buyers save 10%
After 3 years: Buyers save 10%
Rents in Beantown are among the highest in the country, thanks to a limited supply of housing for renters.
Besides a constant influx of students to the area's colleges and universities, the growing tech and biotech sectors have attracted a lot of well-paid workers to the area. That has the vacancy rate in town at just 3%.
The sky-high rents have made the decision to buy in Boston a no-brainer,
said Trulia's Kolko. Even after just a three-year stay, buyers save an
average of 10% over renters. After seven years, that savings advantage
soars to 40%, according to Trulia's data.
Washington D.C.
Buy or rent?: Buy
After 3 years: Buyers save 12%
Washington D.C.'s population has soared over the
past decade. And to accommodate that growth, the housing market has
expanded into the one-time farmlands of Maryland and Virginia, where lot
prices are much cheaper.
That has helped keep a lid on home prices in the hot D.C. market.
During the last three months of 2012, the median price for homes in the
area was just over $300,000, less than half the amount you'd pay in
other major metro areas, like San Francisco
Local rents, however, have risen as a steady supply of government
jobs has attracted many young workers. Over the course of just three
years, homebuyers can save 12% compared to renters, Trulia found, and
41% over seven years.
Seattle
Buy or rent?: Buy
After 3 years: Buyers save 14%
Seattle's land comes at a premium: The area's residential
communities are hemmed in by the Olympic Mountains and Cascade Range, as
well as the Puget Sound.
And the area's strong economy -- helped by a slew of profitable
tech outfits such as Microsoft and Amazon.com -- keeps workers flocking
to the area.
As a result home prices, at a median of $310,000, are more than
60% higher than the national median of $188,000, according to NAHB,
The cost of renting in the area is just slightly higher than the
national average. Even so, with interest rates so low and home prices
forecast to rise, buying is the better option even for those planning
just a three-year stay. They should save 14% compared with renting.
After five years, that saving advantage rises to 34% and to 42% after
seven.
Chicago
Buy or rent?: Buy
After 3 years: Buyers save 33%
Like many old Midwestern towns, Chicago's growth has stagnated over the past decade.
Tepid demand for housing has kept values reasonable, with the median home price in the area at just $170,000.
Rental costs, however, are comparatively high, at nearly $1,600 a
month. That means a prospective buyer would need to have a very short
time horizon and a bad credit history for it to make more sense to rent.
After only three years, a homeowner would pay 33% less in housing
costs than a renter and 50% less after seven years, according to
Trulia.
Houston
Buy or rent?: Buy
After 3 years: Buyers save 33%
The largest city in the Lone Star State is growing at a fast
clip. But luckily for home buyers, there's still plenty of land to build
on, keeping home prices low.
Given Houston's sprawling nature, businesses are less centralized
and commuters don't need to pay a premium to live close to downtown.
In addition, the state's business-friendly regulations keep building
costs low.
All that means home prices remain reasonable, a median of $164,000 in late 2012, according to the NAHB.
Buying is better under nearly all circumstances. After three
years, the savings is already 33% and after seven years that savings
soars to 51%, according to Trulia.
Atlanta
Buy or rent?: Buy
After 3 years: Buyers save 38%
Home prices have fallen dramatically in Atlanta, as foreclosures continue to come onto the market.
The median home price in the metro area is a mere $130,000,
according to NAHB. And while renting is pretty cheap too, buying is
still the better bet.
Even a buyer staying three years would see a savings of 38% over renting.
Detroit
Buy or rent?: Buy
After 3 years: Buyers save 62%
Anyone who wants to live in Detroit for awhile should find the neighborhood they like and start visiting some open houses.
Home prices in Motor City are about half what they were back in
2004. The median price for homes sold during the last quarter of 2012
was just $80,000, less than a fully-loaded Cadillac Escalade.
Even buyers who sell after three years, would save about 62% more than renters on housing costs, according to Trulia.
Yet, Detroit definitely has some downsides: The city has been
emptying out. That has left a housing stock of numerous homes to chose
from, many in bad shape, but all cheaper than almost everything else in
the country.
By Les Christie
Source:- Trulia / CNN Money
Housing Markets where Cash is King
If you want to buy a house in Nevada you better bring cash.
But it's not just Nevada. All-cash deals in Florida comprised 57% of home sales during the month; in the state of New York, it was 51%, and in Vermont, a whopping 80%.
In markets like these, lingering foreclosures and depressed home prices are attracting private equity firms and other investors looking to buy before home prices go much higher, RealtyTrac said.
In other markets, where there are fewer distressed properties, the all-cash deals are a lot less prevalent. Nationwide, cash deals comprised 30% of home sales in June, down from 31% a year earlier, RealtyTrac reported. But in states like Texas, Utah and New Mexico, such deals were practically non-existent.
"The U.S. housing market is slowly but surely moving toward a more normalized and sustainable pattern after a flurry of institutional and cash buyers flocked to residential real estate last year, pushing up prices and picking clean the best inventory available in many areas," said Daren Blomquist, vice president at RealtyTrac.
The biggest metropolitan hotspot for investors right now is Atlanta, where all-cash deals represented 42% of sales in June and investors represented 27% of buyers, the highest ratio in the country. Atlanta is still struggling with one of the highest foreclosure rates in the country, making it a prime target for investors.
Hit hard by foreclosures when the housing bubble burst, Phoenix was one of the first places investors flocked to. A year ago, 25% of all homes sold went to deep-pocketed investors. In June, that percentage dropped to 13% as most of the low-priced, prime properties had already been sold.
"Prices in Phoenix are just too high now," said Tanya Marchiol, founder of Team Investments, a real estate investment firm based in the area. "Last year, I could buy a foreclosure, needing just new carpeting and a paint job, for $80,000, put $5,000 into it, and flip it for $120,000."
A larger share of the deals in Florida, however, are going to individual buyers, according to Blomquist. Retirees come to the state looking to buy with the proceeds from the sale of their former home or cash from their retirement funds. There's also a huge cash-rich international contingent, especially in Miami.
The New York metro area is also something of a special case, said Blomquist. Not only is there a large number of international buyers, but there's also a very limited inventory of homes for sale in the high-demand areas of Manhattan and Brooklyn.
Even buyers who prefer to finance purchases may be forced into cash deals in order to have their bids taken seriously.
"To compete in a market like New York, cash is king," said Blomquist.
By Les Christie for CNNMoney
Trump Sells Himself Outside the U.S.
Donald Trump, who first found fame as a real-estate developer, has put his name on mens' fragrance, mattresses and neckties in recent years. But there is one type of product he hasn't licensed his name to since the beginning of the financial downturn: a U.S. building.
The last time Mr. Trump signed a deal licensing his name to a U.S. real-estate project was in 2007, when he agreed to put it on the Trump Soho, a hotel-condo project in downtown Manhattan. He also sold his name to a golf resort in Puerto Rico in 2008.
Real-estate developer Donald Trump spoke at the opening of the Trump Towers Mall in Istanbul in 2012. It isn't that Mr. Trump has lost his taste for seeing his name stamped in capital letters on other developers' undertakings. He is just doing it overseas instead. In recent years, Mr. Trump has licensed his name to more than a dozen real-estate developers in Turkey, the Caucasus, Brazil and other corners of the globe.
On Wednesday, Mr. Trump is expected to unveil plans for a Trump-branded hotel and condominium tower in downtown Vancouver, British Columbia, according to executives familiar with the project.
Plans for Trump-branded condominiums, resorts and commercial centers also are under way in the Philippines and Azerbaijan. In March, Trump Organization opened an office in Shanghai to identify Chinese branding deals for the company.
Mr. Trump, 67 years old, says he is focusing his licensing business on projects in other countries because he is less familiar with those real-estate markets.
In the U.S., he says he would rather invest his money to acquire and develop his own properties—and put his name on those.
The lull in Mr. Trump's U.S. property-branding deals underscores a feature of his business empire, which includes the TV show "The Apprentice," golf courses and real estate throughout the world, in addition to his licensing business. It is built in large part on Mr. Trump's outsize persona.
"It's not even a question of ego. It's just that my name makes everything more successful," Mr. Trump said in a phone interview from his office in Trump Tower, a 68-story skyscraper he developed on Manhattan's Fifth Avenue in the early 1980s.
In his typical real-estate licensing deals, he sells developers the right to use his name for an upfront fee of between $5 million and $10 million, according to a person familiar with Mr. Trump's business dealings. He also gets a portion of potential future sales, or in the case of hotels, a management contract.
Over the years, Mr. Trump also has sold his brand for use on steaks, bottled water, flavored vodka, scotch and cuff links.
Branding experts point out that the success of Mr. Trump's brand depends on his image as an ultrawealthy businessman with the Midas touch.
"Each time that there's a default or a bankruptcy, it chips away at the value of the Trump name," says James Fox, chief executive of Red Peak Branding, a firm that does brand-strategy work for large firms such as Intel Corp. INTC -0.38% and American Express Co. AXP +1.81%
Trump-branded projects ran into financial problems during the downturn in cities including Tampa and Fort Lauderdale, Fla., and New York. More recently, in January, a real-estate firm that owned the land that was slated to be the Trump Towers Philadelphia condo complex, filed for Chapter 11 bankruptcy protection, with a plan to restructure and restart the project.
The Trump name also was associated with problems in Atlantic City, N.J., where Trump-branded casinos have filed for bankruptcy protection three times.
The Marketing Arm, an Omnicom Group Inc. OMC +0.30% unit that tracks celebrity appeal by using online consumer polls, says that in 2008, Mr. Trump was No. 154 on a list of 3,000 celebrities ranked in order of how effective they were as product endorsers. That was on par with actors George Clooney and Clint Eastwood. Today, consumers rate him at No. 2,763, or about as effective at selling products as pop star Britney Spears and reality-TV personality Kelly Osbourne, the company says.
In 2008, Mr. Trump hired Jonathan Low, a partner with Predictiv Consulting, a branding firm, to assess the value of the Trump name. Back then, he said it was worth between $2.8 billion and $3.4 billion. Mr. Low said that he hasn't compiled any data on the Trump brand since 2008, but he said Tuesday that the value of the brand "probably hasn't diminished and it may have increased."
Mr. Trump blames the financial problems that hit Trump-branded projects on the financial downturn and on the developers, and he denies they have hurt his brand in the U.S.
He points out that he made money on the branding deals even if the projects ran into trouble.
Mr. Trump says these days, when he wants to do a domestic real-estate deal, he will invest in it rather than simply doing a branding arrangement.
His recent U.S. projects include the Trump National Doral, which is a Miami golf resort that he bought out of bankruptcy, and the conversion of the Old Post Office building in Washington into a 260-room luxury hotel.
Mr. Trump began doing licensing deals in the early 2000s, as he was bouncing back from the near-collapse of his real-estate empire about a decade earlier. Mr. Trump says the strategy sheltered him from financial risk while giving him the ability to assure quality control.
According to several of his partners, Mr. Trump provides every developer he works with a manual that outlines building features—including ceiling heights of at least 9 feet, dark glass curtain-wall exteriors and high-end building materials—required for the use of the Trump name.
"It's a hell of a formula," Mr. Trump says about his branding strategy. "The brand is so hot. I made millions of dollars, and I was able to skip this really bad market."
Many of his licensing deals have been successful. The Trump Tower at City Center in White Plains, in New York's suburban Westchester County, sold all 212 of its condo units in less than six months after sales began in 2004.
Foreign developers who have joined with Mr. Trump say his brand is untarnished in their countries.
"Trump is real estate," says Robbie Antonio, the Philippines developer of a Trump-branded condo tower.
In Pune, India—an automotive manufacturing city about 95 miles from the country's financial capital of Mumbai—Panchshil Realty is building two 23-story, glass-clad towers with the Trump name on them.
"Everyone wants to buy the best house. That's the mentality," says Sagar Chordia, a director with Panchshil. "Everybody knows Trump. People have seen the Trump Tower in New York. Everybody watches 'The Apprentice.' "
by Robbie Whelan for The Wall Street Journal
Is Luxury Housing Slowdown-proof?
Being a high margin biz, it offers enough incentives for developers to focus on the segment
Luxury and ultra-luxury housing is keeping developers busy in an otherwise slow market. The year so far has witnessed several luxury project launches by major real estate companies such as DLF, Unitech, Supertech, Tata Housing and Godrej Properties.
For instance, DLF announced the launch of The Crest in Gurgaon and King's Court in Delhi, while Unitech is coming with The One in Gurgaon and another project in the same city. Supertech has announced two luxury projects in the National Capital Region (NCR), wherein it has tied up with Armani and Disney for branded theme-based residencies. Tata Housing has announced its luxury project, The Getaway, in Gurgaon, and Godrej will soon launch its luxury venture in Delhi. Lodha Group and IndiaBulls Real Estate, too, came up with such projects in Mumbai and Purvankara Group in Bangalore.
Numbers, too, show that more and more real estate players are going all out to launch luxury projects, compared to the mid or the affordable segments. For instance, the number of luxury units launched in 2012 in Gurgaon (South Peripheral Road) stood at 3,144 against none in 2009 and 1,344 units in 2010. In comparison, the new units that came up in the mid-segment were 2,774 in 2009, which came down to 1,468 in 2012.
In Malad, a Mumbai suburb, the luxury units launched in 2012 stood at 624, against just 32 in 2009. In comparison, there were about 276 units in the mid-segment in 2009 and just 21 in 2012, according to data by real estate research firm PropEquity.
Experts reason that luxury is a slowdown-proof segment. And being a high margin business, it offers enough incentives for developers to focus on this segment. The trend is expected to continue through this year, too, they said. "In coming times, luxury will have more weight in a developer's portfolio, both in terms of the number and value. The NCR, Mumbai and Bangalore will continue to be luxury destinations because of high net worth individuals and investors," a person tracking the real estate sector said.
Santhosh Kumar, chief executive- operations, Jones Lang LaSalle (JLL) India, said: "Mumbai, Delhi-NCR and Bangalore - luxury and ultra-luxury residential projects have witnessed 10-fold appreciation over their launch prices in the last decade, implying more than 100 per cent annual returns on investment."
In fact, demand for luxury and ultra-luxury housing in cities like Gurgaon has always outpaced supply, which has encouraged developers to increasingly shift their focus on to this segment, he said in an article on JLL's blog.
Among the other cities, in Bangalore (Hebbal), the number of luxury units launched increased to 1,329 in 2012 from 220 in 2010 and none in 2009. In Ghansoli, Navi Mumbai, the luxury units launch stood at 258 in 2012 from none in 2009.
Although definition of luxury can vary from city to city and locality to locality, over Rs 1 crore is usually referred to as the start of luxury. Mid-segment ranges between Rs 40 lakh and Rs 1 crore depending on the city.
The price swing also reflects the rush for luxury. The average price of an absorbed unit in the luxury segment in Gurgaon increased to Rs 6,345 a sq ft in 2012 from Rs 2,563 a sq ft in 2009. In Malad, the price stood at Rs 11,227 a sq ft in 2012 against Rs 7,312 in 2009 (see chart).
An executive from a company, which is present across all segments - affordable, mid as well as luxury - said luxury projects gave high returns compared to other segments. But the volume of sales comes from the affordable and mid-segments. "Luxury units sell off even in an otherwise slow market, which is why developers are going on for such projects."
In a recent interview with Business Standard, Brotin Banerjee, managing director and chief executive, Tata Housing, said the luxury segment would grow as people aspired for better homes and a better quality of life.
"The demand for luxury housing in India is growing due to the changing lifestyle and aspirations among young India. With rapid urbanisation and influx of global lifestyle trends, more and more affluent home buyers are looking for homes to reflect the financial and social standing," Banerjee had said.
In another indicator that luxury means business, developers are roping in global celebrities such as Maria Sharapova and Michael Schumacher to endorse their projects. Besides, many Bollywood star wives have been designing real estate projects.
Credit:- Mansi Taneja for Business Standard
Say Mumbai real estate, and the reaction one is bound to get is 'astronomical'. The commercial capital of the country has been synonymous with high property prices and the chasm between affordability and sale price is only widening. The latest instalment of the NHB Residex, published every quarter by the National Housing Bank, shows that the index for Mumbai had a value of 175 in January-March 2011. That rose to 190 during the same quarter in 2012 and for this year it has shot up to 222, which is an increase of 26.8 per cent when seen from the 2011 period.
The high prices notwithstanding, prospective buyers are also holding back on account of high interest rates as well. All hopes of a rate cut have been belied as the central bank finds itself in a tough situation where it's priority is tackling inflation.
Given this scenario, developers have usually taken recourse to attract buyers with freebies during the festival season. A recent report by Bank of America-Merrill Lynch showed that during the January-March period of this year, sales have picked up across major cities and particularly Mumbai primarily on account of new launches and discounts offered by developers.
"Historically, the second half of the financial year have been better than the first half as developers launch more projects, advertise more in run-up to Diwali and local new year such as Ugadi and Gudi Padwa," said Abhishek Kiran Gupta, research analyst and author of the report.
This is especially true of suburban areas where the demand is usually high with the average ticket sizes being low.
ND Mehta, a Mumbai-based property consultant says that the February-March period is usually a time when the real estate market in the city shows an upward trend across all segments, residential and commercial. "This is mainly due to investment-depreciation benefits and EMI for the home loan. The income tax benefits matter to many, so it is usual to witness spur in deals before March 31 and then the registration in March or April. Developers also try to dispose piling inventories to meet their obligations with the banks or financial institutions or investors."
This is borne out by the fact that registrations have indeed gone up during this period even when the overall sales have shown a slump.
Even then, this year around, sales haven't been up to the mark. "Buyers were expecting good discounts and freebies but developers could not meet those expectations. Even the current Gudi Padawa did not mark significant offers or sales especially in the suburbs," says Ramesh Ranka, a broker in the suburban Khandivali-Borivali area, which has seen many launches in the lower-priced segments.
In the midst of all this gloom, one area has actually witnessed a growth in sales: the central part of the city, the Dadar-Parel-Worli area.
A report by brokerage firm Prabhudas Lilladher shows that sale deed registrations for the first five months have shown a robust growth and was led primarily by the city area. In addition, the huge slump the previous year gave it a low base which makes the numbers even more impressive.
This, the report says, is on account of a rise in the number of launches in the city as compared to the suburbs during the period under review. Another interesting facet is the year-on-year lease agreements have actually fallen in the city while sale deeds have gone up.
Launches, notwithstanding, the southern and central parts of Mumbai have shown the maximum fall in unsold inventory levels during 2012, according to the most recent report on the city's real estate by Knight Frank released in February 2013.
Now, these parts of the city are the upcoming premium residential and commercial destinations and for any developer who chooses to launch a project, land cost forms a significant component of the total cost. In August 2012, DLF sold 17 acres of land to Lodha Developers for Rs 2,725 crore. In 2011 Piramal Realty purchased mill land from Mafatlal Industries for Rs 605 crore.
What then explains the rapid off-take in inventory? As the Knight Frank report says, "Prices have been moving in a narrow range in the past four quarters as the market slowly adjusts to the increasing launches. As prices in premium micro markets tend to be much more volatile compared to the suburbs, prices in some south and central Mumbai locations like Parel, Lower Parel and Mahalaxmi, have declined close to 10 per cent over the previous three quarters."
That is one possible explanation why those sale deeds numbers are up. With prices in these areas in the range of Rs 20,000-Rs 45,000 per sq ft, the offerings are bound to be in the premium segment. "Developers in a bid to liquidate their higher priced inventory have been more open to negotiation in the premium segment, reducing prices substantially in favour of a sizeable up-front payment," says the Knight Frank report.
Which explains the rising sale deeds.
Source:- ENS Economic Bureau for Indian Express
Developers often quote high prices but they would be more than willing to give discounts
In monsoon, builders may lure customers with benefits over and above their usual offers. Sanjay Dutt, executive managing director (South Asia) at Cushman and Wakefield, says a number of builders have come up with schemes to attract customers and reduce inventory levels. "The offers range from 80-20 schemes, zero booking amounts, no pre-EMI (equated monthly instalment) and no floor-rise charge schemes to paying a fixed percentage at time of booking and the rest on possession."
Is it a good idea to go house hunting on a rainy day? Well, for all
you know, your efforts might pay off: One is likely to bag a good deal
on a house during the monsoon.
Since demand for properties is less in the monsoon, developers see a dip in the number of inquiries, too. Hence, low property-sales coupled with high inventory levels are reason why developers may go an extra mile in giving customers a better deal now.
Ashutosh Limaye, head (research) at Jones Lang La'Salle India, says, "Since residential sales have been stagnant and inventory levels remain high, developers will be more than willing to negotiate property rates and give home buyers a good deal." He, however, adds unlike in the festive season, developers don't give discounts openly during the monsoon.
Inventory levels: In the metros, the absorption rates and inventories are increasing. This clearly indicates sales of residential units are not keeping pace with supply. Pujit Aggarwal, managing director and chief executive, Orbit Corporation, says, "During monsoon, the sales volume of residential units easily dips by 20-25 per cent." For the January-March period, the level of unsold inventory in Bangalore and Kolkata is high, compared to the year-ago period.
"Inventory levels are so high that cities such as Mumbai, Bangalore and Delhi have unsold stock that can last for 34, 23 and 20 months, respectively," says Limaye.
Offers / Discounts:
Since demand for properties is less in the monsoon, developers see a dip in the number of inquiries, too. Hence, low property-sales coupled with high inventory levels are reason why developers may go an extra mile in giving customers a better deal now.
Ashutosh Limaye, head (research) at Jones Lang La'Salle India, says, "Since residential sales have been stagnant and inventory levels remain high, developers will be more than willing to negotiate property rates and give home buyers a good deal." He, however, adds unlike in the festive season, developers don't give discounts openly during the monsoon.
Inventory levels: In the metros, the absorption rates and inventories are increasing. This clearly indicates sales of residential units are not keeping pace with supply. Pujit Aggarwal, managing director and chief executive, Orbit Corporation, says, "During monsoon, the sales volume of residential units easily dips by 20-25 per cent." For the January-March period, the level of unsold inventory in Bangalore and Kolkata is high, compared to the year-ago period.
"Inventory levels are so high that cities such as Mumbai, Bangalore and Delhi have unsold stock that can last for 34, 23 and 20 months, respectively," says Limaye.
Offers / Discounts:
In monsoon, builders may lure customers with benefits over and above their usual offers. Sanjay Dutt, executive managing director (South Asia) at Cushman and Wakefield, says a number of builders have come up with schemes to attract customers and reduce inventory levels. "The offers range from 80-20 schemes, zero booking amounts, no pre-EMI (equated monthly instalment) and no floor-rise charge schemes to paying a fixed percentage at time of booking and the rest on possession."
A few developers also offer free furnishings such as modular kitchens
and air conditioners. "Apart from this, some developers also offer cash
discounts and/or free parking, especially for properties in the
mid-segment, which are price-sensitive," Dutt adds. Discounts and offers
vary, depending on the builder and the city the developer is based in.
However, there isn't a right time for someone looking to buy a first home, as his/her decision would depend on the need and urgency for a house.
Home-buying in an off-season: Since the monsoon is followed by the Pitrupaksh/Shraadh period, real estate experts say property sales get impacted heavily. Niranjan Hiranandani, managing director of Hiranandani Group, says, "The reason behind this is pitrupaksha is considered an inauspicious period, and most potential home-buyers prefer booking flats on occasions such as Diwali, Dussehra and Gudi-padwa."
Therefore, developers may not advertise monsoon-specific discounts, though they would be ready to negotiate if a potential buyer shows interest. Experts say developers advertise their discounts only on occasions such as Diwali and Dusshera.
There is immense scope for bargain in the central Mumbai region, as about 40 million sq ft area is under development and would be up for sale in two to five years. Hence, we could expect some property price cuts there, owing to the heavy supply," says Aggarwal of Orbit.
Advantages:
However, there isn't a right time for someone looking to buy a first home, as his/her decision would depend on the need and urgency for a house.
Home-buying in an off-season: Since the monsoon is followed by the Pitrupaksh/Shraadh period, real estate experts say property sales get impacted heavily. Niranjan Hiranandani, managing director of Hiranandani Group, says, "The reason behind this is pitrupaksha is considered an inauspicious period, and most potential home-buyers prefer booking flats on occasions such as Diwali, Dussehra and Gudi-padwa."
Therefore, developers may not advertise monsoon-specific discounts, though they would be ready to negotiate if a potential buyer shows interest. Experts say developers advertise their discounts only on occasions such as Diwali and Dusshera.
There is immense scope for bargain in the central Mumbai region, as about 40 million sq ft area is under development and would be up for sale in two to five years. Hence, we could expect some property price cuts there, owing to the heavy supply," says Aggarwal of Orbit.
Advantages:
Hunting for a house in the rains could be painful. However, this provides an opportunity to check the quality of a flat's construction. Home buyers could check for water seepage or cracks that might have developed due to insufficient waterproofing by the developer. Additionally, one could see if the area suffers from water-logging.
The maintenance of sample flats and societies during monsoon could be difficult. Therefore, this would help home buyers get a real picture of what the house would be like during rains. It would also help one assess whether he/she plans to buy a plot of land. One could negotiate for a lower price if the area is prone to flooding.
Home loans:
Currently, banks offer home loans of up to Rs 75 lakh at 10-10.25 per cent. However, if the loan amount is higher, banks may charge a premium of 25 basis points on the loan. "As soon as monsoon is over, home loan disbursements record an increase," says a banking official. Therefore, if the person has a good credit history and relationship with the bank, he/she could use this period to negotiate with the bank for better rates.
Source: Business Standard
Developers now homing in on Studio and Serviced Apartment
Real-estate players are now eyeing first-time home buyers, expats and
those who come for medical treatment by offering studio and serviced
apartments. Even non-resident Indians who want to park their funds in
real estate seem to be keen.
With a slew of such projects under way, developers are banking on them
to help generate quick cash-flows, as unlike other types of apartments,
investors are not required to shell out huge amounts.
In fact, such is the interest in both studio and serviced apartments
that even the Delhi Development Authority has proposed a new provision
in the Master Plan 2021 for introduction of such apartments.
According to the proposal, studio apartments will be allowed to come up
in residential zones, while serviced apartments will be restricted to
commercial centres.
Ideal for extended business and leisure trips, serviced residences
combine the comfort and privacy of a home with the services of a luxury
hotel.
Two products
Serviced apartment and serviced residence are two different products.
While the former is part of commercial operations and comes under the
hospitality business, the latter is part of the real-estate business.
While international brands such as Fraser Suites and Ascott and domestic
brands Assotech, DLF, Wave and Cosmic have already entered the serviced
residences category, Supertech, Jaypee and Hiranandani have made
inroads into studio apartments. Private equity firm Ireo has tied up
with Singapore-based Ascott to manage its Rs 400-crore serviced
apartment project in Gurgaon. Ascott, the world’s largest serviced
residences operator, manages about 70,000 units across about 22
countries.
According to Ireo, serviced-apartments is a growing segment with a lot
of potential in markets such as Gurgaon, which see large-scale movement
of business executives.
Alfred Ong, Managing Director, Strategic Development, Ascott, feels that
the “the serviced apartment segment is under-served. Our Gurgaon
project will have 220 serviced apartments. Of these, we have earmarked
160 for the rental pool, while the balance will be private residential
apartments.”
A one-bedroom apartment comes at Rs 1.8 crore. The company said it was
targeting markets that have high MNC influx and will also bring in other
sub-brands — Citadine and Somerset, among others.
According to Pankaj Dugar, hospitality head at Ireo, “The rental value
of serviced apartments is also growing at a steady pace. We plan to make
several such investments in Chennai, Maharashtra and Goa”.
Analysts note that the booming medical tourism industry is also giving a
big push to serviced apartments. Destinations such as the National
Capital Region, Chennai and Bangalore have emerged as medical hubs.
For developers, too, setting up serviced and studio apartments is profitable as operational and overhead costs are lower.
Shubhranshu Pani, Managing Director - Retail Services, Jones Lang
LaSalle India, says the concept of mixed-use development helps diversify
the tenant mix. It also allows developers to fully utilise the floor
space index and location.”
Author: Bindu D. Menon for The Hindu Business Line