Should a market ‘slowdown’ influence your home buying decision?

[] Does a period of recession have any actual impact on the real estate market and should buyers base their purchase decision on it? We look at the ground realities

In the real estate market, fear is often used as a tool to drive the market sentiment and to influence the demand and supply matrix. For several years now, we have often heard that a ‘slowdown is crippling the realty market’ but the same is hardly reflected in the prices of properties. Hence, let us first understand the phenomena of a recession or slowdown and how it affects the realty market.

When there is a significant fall in manufacturing and employment, due to weak demand and if such a condition results in a GDP contraction for two continuous quarters, then, it is said to be a recessionary situation.

Experts point out that unlike other sectors, the realty sector has not yet witnessed a demand problem. While there may be some mismatch between the buyer’s price expectation and what the seller is ready to offer, largely, the demand is growing steadily.

“Real estate is a staple need for every person. After all, everyone needs a home!  As a result, recessionary periods have negligible effects on home buyers and the realty market and in some cases, have even caused growth in the housing sector,” says Girish Shah, director of The Wadhwa Group.

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“The importance of the real estate market and the ever growing demand for homes, means that regardless of recessions, housing will continue to be a secure investment,” he maintains.

Why a slowdown may not wipe out the realty sector

According to experts, there are some important factors that will ensure that recessions do not affect the realty market:

  • The government, as of late, has taken a proactive stance in policy making, in order to ensure the continued growth and stability of the real estate industry.
  • The total cost involved in construction is expected to drop with technological improvements, and the savings will be passed on to the customers, resulting in more competitively priced homes, without any compromise on quality.
  • Increase in transactions, during the festive season, will ensure that the markets stay stable and witness steady growth.
  • The realty sector can adopt measures to counter problems that may arise if a recession does occur, making the market a safe bet.

In the affordable housing segment, capital values have remained firm and the demand strong, across all major cities such as Mumbai, Bengaluru, etc., especially for projects from branded developers, explains Rohit Poddar, managing director of Poddar Housing and Development Ltd. “Commercial spaces have seen a sharp rebound in the year 2015, with capital appreciation, as well as an increase in office space rentals, across all major metros, led by the IT and services sectors,” he adds.

Experts’ take

Experts point out that periods of boom as well as downturns, are all part of cycle, for all markets and industries and real estate is no different. Thus, a first-time home buyer should not be bogged down by reports of a slowdown. Any time is a good time to buy a house, if it is for your own stay. Also, buyers may certainly have certain advantages, in a recessionary market.

Copyright belongs to:

Debora Berti

Università degli Studi di Firenze, IT

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