The year 2018 was an interesting one for the realty segment. For many developers and lenders, the year was quite regrettable. For home buyers, it may appear mostly forgettable.

But there were a few interesting undercurrents. For one, there was a clear acceptance that there will be no quick recovery or a miracle turnaround from measures such as lower interest rates that typically boost confidence. This and other developments have led to a sure, albeit minor, shift in the housing market — it becoming firmly grounded as a buyers’ market.

RERA age

One key event that brought some cheer to home buyers was the small empowerments they obtained through regulations. From feeling helpless in the past, buyers were able to not just get their voice heard but also obtain justice through RERA (Real Estate (Regulation and Development) Act). Data from real-estate consulting firm ANAROCK showed that as of November 2018, over 4,900 complaints were registered in Maharashtra, and orders were passed for 3,060 complaints. In Uttar Pradesh (which includes Noida, a hot bed of developer delays), 8,000 complaints were filed.

There is no doubt that RERA still has some way to go. For instance, in Uttar Pradesh, only a little over one-fourth of the complaints have been addressed. And some States such as Kerala and West Bengal have not yet launched their websites. Other States including Tamil Nadu have had only a very modest number of projects (778 as of November) and agents (367) registered.

But the impact from the availability of data is beginning to show. Potential home buyers can search and find a lot of relevant information on their State’s RERA website. For instance, you can quickly find project details including completion date, developer details and various approvals such as those given by the town planning authority and any permits for building approval. Earlier, these were not readily available and took a lot of digging around by the buyer, including talking with the developer and other sources. Now, a buyer can instantly get a rich store of pertinent data online.

Also, the details of various RERA complaints — arguments in cases and the judgements given — provide a wealth of data for buyers to learn and understand. The disputes as well as information on rejected projects also provide a way to build your negative list — projects and developers you may want to avoid.

Just as RERA aids transparency in a big way, another related regulation — the Insolvency and Bankruptcy Code (IBC) — empowers buyers when their developer defaults. While it is still early days of the regulation and though it may not be the magic bullet to fix issues when there is a default, IBC certainly provides much-needed ammunition to buyers. With the IBC, a home buyer can seek rights equal to that of a lender and can take their builder to court if delivery terms are broken.

No price utopia

Home buyers who bet on steep price correction, however, did not see that happen in 2018. Data from multiple sources show that prices have not been in doldrums in most cities. For instance, data from real-estate consulting firm Liases Foras (for quarter ended September 2018) showed that the weighted average price in cities including Ahmedabad, National Capital Region (NCR), Mumbai Metropolitan Region (MMR), Pune, Bengaluru, Hyderabad, Chennai and Kolkata remained stagnant, compared with a year ago.

One reason why no price crash was recorded (possibly except in select micro-markets and in distress sales) may be because of the support provided by the uptick in demand. Quarterly sales have been rising (9 per cent year-on-year in September 2018, as per Liases Foras) even as unsold inventory went up. As a result, the expected time to sell existing stocks of houses has been falling.

For example, Chennai’s housing inventory was 63,940 units in September 2017; it increased to 73,685 units in September 2018. However, it was estimated that the 2017 stock would have taken 71 months to sell, but the higher stock in 2018 was expected to be sold in 68 months, thanks to better demand.

Intuitively, it would appear that price crash would have helped clear out inventory and jump start a robust fresh cycle, and the tepid price action only prolongs the doldrums. Still, price stability may be a better proposition for an asset over the long term and to keep out speculation.

Ready-to-move-in

While many new projects were launched, 2018 saw a clear preference from buyers for ready-to-move-in properties. This was a shift from under-construction houses that typically gave better financial returns for those willing to take the risk of delays and defaults. One reason is that the large stock of completed houses provided ample choices for a home buyer to cherry-pick.

Also, finished projects were priced competitively against new launches as developers were keen to clear out their inventory. So, a home buyer had more incentive to take the less risky path.

The side effect of this was that houses were seen more as an end product than an investor’s game.

The writer is an independent financial consultant

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