Under Construction Projects to face multiple challenges

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Under Construction Projects to face multiple challenges in next few quarters

Year 2020 ended with a boom in the real estate market where transaction volumes soared due to multiple reasons.

1. Stamp duty reduction

2. Price reduction by developers and home owners

3. Pent up demand of 2019 and 2020

4. Investors made money in Gold and stock market

5. Need based due to work from home etc

Year 2021 starting from April the stamp duty is back to 5% in Mumbai and 6% in Maharashtra and April, May have gone in lock down kind of environment.

This lock down and the second wave of covid has hit a lot of us directly with each one of us loosing a friend or a near or distant relative to covid giving us a sense to remain cautious and risk averse.

The backbone of real estate business to flourish is a strong economy and with 2 months washed out in 2021 we are looking at a weak start as the first thing everyone would want to do is restart their works and real estate with missing drivers meaning no add on benefits like Stamp Duty reductions or price cuts is not looking the best and then we have the monsoon coming in.

The ray of hope in this is:

1. Ready possession inventory in select micro locations in Mumbai will continue to do well.

2. With labourers gone and a halt in project progress the inventory over hang will drop and stagger which means the demand and supply ratio will not be as skewed as it used to be in 2017-2018.

What do you do as a Home buyer!

If you are a home buyer in Mumbai. Then find deals in both developer properties and resale properties and don’t ignore the option to moving into lease and leasing out your own Apartment.

We don’t expect any deals from Government as of now, but this can change if the pressure remains so watchful.

Should I buy under construction properties?

Yes, surely you will get new launches at better pricing, but do your calculations as if you are going to pay interest on home loan, stamp duty and GST and if you are not getting the developer deal substantially less than the market price then there is no joy with added risk. It would be advisable to be careful in choosing the projects and who the developer is and what kind of liquidity the developer has to complete the project.

Due to slow construction new supply will be constrained so prices may not come down as you would expect and in the expectation of a good deal you may loose out as well.

Markets are dynamic, the situations will continue to evolve, it won’t take much time for economy to turn bullish from the bearish as the Indian economy is far resilient, so make your choice and adapt to changes.

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