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Posted at: Jan 13, 2018, 1:17 AM; last updated: Jan 13, 2018, 1:17 AM (IST)

Crumbling consumer confidence

Crumbling  consumer  confidence

Ravi Sinha

Consumer confidence is the lowest in the Indian real estate market in the past 10 years, ever since the market showed the first signs of nervousness. The worst part is that there is no hope of a market revival sometime soon as the homebuyers have already taken a conscious decision to stay away from the housing market for some more time.

The recent job market uncertainty and the developers’ failure to seize legislative opportunities to come clean and trustworthy has only worsened the consumer outlook with what was once the sunrise industry and the best investment instrument for the majority of Indians.  

The low consumer confidence has been linked as much to peoples’ lack of confidence in their own ability to pay as to the employment uncertainties. Collectively, the buyers’ risk aversion in today’s economy as well as the developers’ unfair business practices have eclipsed real estate like never before.

Data collected from 20 top cities in the country reveals that seven out of 10 prospective homebuyers won’t commit for the life’s costliest purchase anytime soon. Nearly half of homebuyers(nearly 48 per cent) are uncertain about the job survival; 27 per cent think the ROI (Return on Investment) is not attractive; and 25 per cent are fed up with the uncertain delivery timelines of the projects.

Real estate figures at third level (only 20 per cent finding it to be the best investment) after 26 per cent voting for gold and other similar products with more liquidity options. “It is about financial prudence and is definitely not an emotional urge to have a house of one’s own. With double-digit returns, financial products make more sense to me. Over and above that I have the liquidity and I can monitor its performance on a weekly basis to stay put or exit. Real estate is by and large a locked-in investment today and in case of financial emergency it is often not easy to exit,” maintains Shivprakash Reddy, a bank employee, in Hyderabad.

Waiting for correction

Beyond low consumer sentiment, there is another reason why the homebuyers would not commit in the housing market anytime soon. A majority of homebuyers fancy chances of property market correction, if not an outright crash.

“It is like who will blink first in the property market now. I know not many developers are in a position to hold on to the prices with the amount of inventory that they are sitting over. Hence, wait-and-watch is the best bet to get a better offer in year or two,” says Sumedha Shah, an architect, in Ahmedabad. 

The buyer psychology, however, slightly varies between first-time homebuyers and the second/repeat buyers. While only 18 per cent second buyers have confidence in the market at this point of time, consumer confidence index stands 38% with first-time homebuyers.

Missing policy boost

The recent policy changes have so far not given a boost to consumer confidence.  “When I find the builders openly advertising the project with Super Built-up Area and not the Carpet Area then how would I trust that the RERA has fixed  accountability? It seems either the law has no teeth or the projects are too many for the regulator to streamline the system. In some cases RERA actions that we read in the media reports are result of buyers fighting it hard with the builder. I am not sure how many of the buyers have the resources and time for all this,” says Raman Prakash, a school teacher in Greater Noida West. The disillusioned buyers also maintain that  despite the slowdown, the developers are not learning lessons and thus the ball is in the court of developers if the consumer confidence has to be improved sometime soon. 

— The writer is CEO, Track2Realty

Is it wise to invest?

Over the past couple of years property seems to have lost its appeal in comparison with other competing products, with only two out of ten investors finding it the best place to park money.

More than half — as many as 54 per cent— are interested in financial products like mutual funds and stocks for better ROI as well as the liquidity. 

Pessimism rules

The consumer confidence score is the lowest in Kolkata at 12 out of 100. Consumer confidence score has been 28 at national level. However Bangalore surpassed the national average with a score of 34.


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