Realty investors in Panchkula are facing tough times with prices declining in the past six-seven months, says Munieshwer A Sagar
G oing with the prevailing trend of price correction in the residential segment in the Chandigarh tricity real estate market, the Panchkula residential realty market has seen the sharpest dip in prices in the past few months. Local realty experts peg the fall in prices at around 20% to 25%.
Variations in the rate of fall depends up on location of a property, it is less in older sectors like 7, 8 and 9; and more in new sectors like 25, 26 and 27.
In older sectors 6, 7, 8 and 9 a house measuring a kanal (around 418 sq m) is priced at around R6-8 crore.
In sectors 10, 15 and 16, an old house or plot of the same size is available for around R4 crore to R5.5 crore. In comparatively new sectors like 21, 12, and 12A, the price level is around R4 crore to R4.5 crore. In sectors beyond the Ghaggar river, the price of a kanal is around R3 crore to R4 crore.
Changing market fortunes The Panchkula real estate market, specifically the residential segment, has seen dramatic price variations in the past three-four years. “Prices in the city almost doubled during the last boom period during 2009-2011. The peak price of a kanal house in the beginning of 2009 was around R4.5 crore. However, by the end of 2011, the peak price of a kanal house stood at around R10 crore, an appreciation of more than 100% during a two-and-half period. By the end of January 2012, however, the peak price of the same property stood at around R78 crore, and is still declining,“ says R P Malhotra, a citybased real estate expert.
It is one of the steepest falls in prices in the tricity, particularly when compared to Chandigarh's residential segment where the decline was only between 5-10%.
The impact of the dip in prices on an investor can be judged only in reference to the timing of the investment.
If an investor made an investment in the local residential market in the beginning of 2009, then the return even after price dip is around 75%. But, if an investor parked his fund in a residential property in the city in the beginning of 2011, then he lost almost 25% on his investment by the beginning of 2012. Prices had peaked by mid-2011; for a month or two there was stability in prices, but since then prices have fallen consistently.
Dynamic realty Demand/supply: The demand and supply dynamics are major factors determining the price correction movement. Realty in the city's market is primarily driven by the investor.
“When the investor sentiment is positive, market growth rates rise very rapidly. When most investors leave the market, price levels start to decline. This is exactly what is taking place right now. The demand from the investor has nosedived in the past six months. At the same time, supply has increased as many investors who could not exit in time are now trying hard to do so before the market falls further,“ says Manjit Singh, a Zirakpur-based real estate consultant.
High prices: Local realty experts say market prices had risen too high, even out of the reach of most investors. At such high prices, investors did not want to commit huge funds to the property or is given alimony, which may include more than one such residence and immovable properties.
Hence, she is given the right to reside and to continue to reside in the household she shared with her husband (that is, her matrimonial home).
The courts have also stated that reference to `joint market because margins had also fallen.
“There was a time when most smart investors made money and exited the market. Now, the remaining investors are trying to exit without much success. When this backlog is cleared, growth will return to the market. This will complete the cycle,“ says Singh.
Home loan rates: The current high interest rates on home loans have also negatively impacted demand and investor sentiment.
Rates rose at a time when the market was peaking.
Speculators' market: Realty speculators have come to dominate the local realty market, which can translate into either high gains or steep losses. Unlike the other realty markets in the tricity, the stabilising middle ground is missing.
“When the speculator is active in the market, price levels appreciate very fast.
When the speculator exits, family' is obviously in a generic sense, and importing notions of the Hindu undivided family would unwittingly give greater benefits to one section of the community, which was never the intention of Parliament.
A weak definition of shared household will defeat the objectives of the said law.
The challenge that the end-user and investor demand cannot hold the price level high. End-user demand is very limited due the average price level being very high and not being affordable for most middle class end-users,“ says Ravinder Malik, a local real estate consultant.
Local realty experts say that getting a good deal in the Panchkula realty market is all about timing. If an investor times it right, the local market can give the best of returns. However, if the investor's timing is bad, then the market can be very punishing. Most experts say that a wait-and-watch policy is best for current conditions. “It is not the best time to sell or buy, though the buyer is in better position than the seller.
Prices are expected to decline further from the peak level achieved during 2011,“ says Singh.
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The author is an associate at Trilegal, a law firm based in New Delhi. The views expressed in the article are that of the individual lawyer and not particularly of the firm
Courtesy – HT Estate (hindustan times) dt – 18/2/2012 (chandigarh)