The current slowdown in the Indian economy has impacted several sectors, including real estate. Apartment sales volumes have plummeted and inventories have piled up, creating an ideal environment for buyers to negotiate with developers. However, successful negotiations need to have a firm foundation of information and strategy, feels Santhosh Kumar, CEO, Operations, Jones Lang LaSalle India.
- Knowledge of the current market situation
Currently,
the biggest indicator one should be informed of is inventory levels,
which play and important role in the dynamics of bargaining power
across various cities. However, one must also understand how prices have
moved in the recent past in order to keep flamboyant expectations in
check.
As
per our proprietary REIS database, developers in Mumbai are holding on
to
inventory levels of close to 48 months. That is quite significant,
considering that a comfortable level of inventory is around 12-15
months. Other tier 1 cities such as Delhi (with 21 months), Bangalore
(with 25 months), Chennai and Kolkata (both with 17 months)
are in a relatively more comfortable state when compared to Mumbai,
although there are signs of pressure to sell in these cities as well.
Property
prices have not risen much over the last 19 quarters (from 3Q 2008
until 2Q 2013) across major metros in India. In Mumbai, residential
apartment prices have risen at a modest compounded annual growth rate of
4.3% during this given period. If we compare this with the wholesale
prices inflation rate, which averaged over 7.0%
during the same period, we realise that prices have actually fallen
marginally. The situation in other metros such as NCR-Delhi (1.4%),
Chennai (3.8%), and Bangalore (5.5%) is not too different. Therefore, it
is imperative to keep expectations from a negotiation
at a rational level.
- Convert meaningless offers into meaningful cash discounts
In
order to attract buyers in the currently difficult market, several
builders
are resorting to offers and freebies. Some of the recent examples of
such offers include free 10-gram gold coin, waived floor-rise charges,
free stamp duty registration, free memberships to club houses and
amenities, free modular kitchens, international holidays,
free cars, etc. Negotiators who do not see value in such offers can and
should negotiate for better prices instead.
- Enlist the help of an expert
Typically,
buyers seek to avoid brokers because they wish to avoid brokerage
fees. However, not all buyers are in a position to strike a good deal
with builders or landlords. They could risk paying more than required,
or winding up with an apartment in a bad locality and by a
less-than-reputable builder. Buyers should explore all channels
of transacting – brokers, online information sources as well as direct
contact with owners, if possible. This will help evaluate one’s
on-ground ability to strike a good deal. It may emerge that a good
broker is actually a better bet.
- Express interest
This
is probably the most misunderstood aspect of a negotiation. It is a
myth
that expressing their interest in purchasing a flat puts one at a
disadvantage at the negotiation table. In fact, buyers should clearly
express their desire to purchase so that developer can seriously
consider offering them a better deal. Builders treat genuine
buyers very differently from idle information-seekers. Buyers should
approach the negotiation table with their chequebooks, ready to pay a
token amount and every assurance of serious interest if a good deal is
offered.
- Don’t attempt to time the market
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