Hyderabad: For people looking to buy an apartment, it is conventional wisdom to book one when it is under-construction rath-er than when it is ready to move in to. Under-construction (UC) homes have always been cheaper than ready-to-move-in (RTM) counterparts. However, according to a recent study by property consultancy group Anarock, the price difference between the two categories has fallen hugely.
According to the study, the average price difference between RTM and UC homes in 2019 was only six per cent. The average price of UC homes in 2019 was Rs 4,015 per sq ft, while those of RTM homes was Rs 4,250 per sq ft.
The research mentions that RTM homes sold after completion do not attract GST, whereas UC houses attract a 5 per cent GST rate. It says this is one of the factors behind the low price differential.
The data reveals that the price gap in the country’s top seven markets (Delhi NCR, Mumbai, Kolkata, Chennai, Bengaluru, Hyderabad and Pune) ranges between three and seven per cent. The price disparity has, in fact, registered a year-on-year decline.
In 2018, the difference was 5 to 9 per cent; in 2017, it was 8 to 12 per cent in these cities. Delhi-NCR region saw the biggest fall from 10 per cent in 2017 to just three per cent in 2019. In Mumbai, the gap narrowed from 11 per cent in 2017 to just four per cent in 2019.
The study said the reason for the reducing gap is that developers are reluctant to hike prices of ready properties due to the prevailing economic slowdown in the country. This broadly corresponds with data of overall residential sales. According to Anarock, sales in the seven markets rose by a marginal four per cent in 2019.
Anuj Puri, chairman of Anarock, in an email conversation, said that for residential real estate to do well, macroeconomic factors such as job stability and consumption play significant roles. “In the wake of sluggish economic growth, developers are keeping property prices at their lowest best so as to not irk buyer sentiments,” he said. Puri said that the trend would create tremendous pressure on smaller players who depend on advance payments from customers to develop their ventures.
“A handful of developers with sound financial capabilities are launching projects only after they are ready to move in. If this trend picks up momentum, it will put a dent in smaller players or may result in a complete wipe out of many developers. As it is, many developers are already cash-starved and with hardly any advance sales for their under-construction projects, it will get very difficult for them to carry on development,” he said.
Meanwhile, prospective home buyers in the city said they have noticed a similar trend. Most of them have bitten the bullet and bought a home immediately. Meghana and her husband, for instance, have been looking to buy an apartment in Pragathinagar. “We were planning to book an under-construction apartment and wait for a year. But there doesn’t seem to be a big difference in price in currently available apartments and under-construction apartments. We chose to buy a ready one.”
