India’s real estate sector is far from reversing a slowdown. Unsold inventories are piling up in the National Capital Region (Gurgaon, Faridabad, Noida, etc.), Mumbai, Bengaluru, and several other Indian cities. With builders delaying handing over possession of apartments, it could take anywhere between three and five years to clear that pile.
In such gloomy conditions, consumers are attempting to outsmart builders who, besides the prolonged delays, are also known for their poor quality of construction and manipulation of carpet area.
Increasingly, buyers are opting for ready-to-move-in apartments instead of under-construction homes, a report on consumer preferences by MagicBricks.com—an online property portal—has found from its listing of one million residential properties.
A delay in projects “leads to consumers having to bear the additional financial burden of paying rent over and above the applicable home loan installments,” the report said.
In nine out of 14 cities over the last two years, the demand for ready-to-move-in properties has been more than for under-construction properties.
“The price change would not hold for such a long period if there was no underlying preference from consumers,” Rohit Vats, chief manager—research, MagicBricks, told Quartz.
In a developing market, under-construction properties are preferred over ready-to-move-in ones, primarily because a buyer can enter a project at different stages of construction, said Vats. In addition, the entry cost is lower and there is more flexibility to book profits.
But, in the current slowdown, these advantages do not stand. In fact, buyers are so wary of under-construction projects that they are ready to pay more—on an average, ready-to-move-in apartments command 5% premium over under-construction properties. In Greater Noida, on the outskirts of India’s capital city, the premium can be as high as 21%.
Except New Delhi, Chennai, Ahmedabad, and Hyderabad, ready-to-move-in properties come at a premium in all major Indian cities.