Paresh Shah, an executive with Forbes & Co, has been scouting to buy a home in Mumbai for two years, without success. Despite developers' claims of price cuts, sharp fall in interest rates and the economic stimulus packages, Shah is unable to find his dream house within a budget of Rs 30-35 lakh (Rs 3-3.5 million) at Powai.
"I will wait and watch for some more time. If I get a good deal for one bedroom-hall-kitchen (BHK) house or a 2-BHK, I will grab it even if they do not give me a club house or a swimming pool,'' says a frustrated Shah as he moves from one stall to another with his wife and kid in tow at the 'Property 2009' exhibition, underway at Bandra Kurla Complex in Mumbai.
About 80-odd developers, showcasing about 1,000 projects, are participating in the exhibition, which ends on April 12. Houses on offer range from unfinished projects to so-called affordable houses and premium houses.
"I find it amusing that even after staying in Mumbai for 10 years, we can not afford a house," Shah said in response to the point that developers had already cut prices by 20-30 per cent. "If prices have come down to Rs 85 lakh (Rs 8.5 million) from Rs 1 crore (Rs 10 million), I do not think it is worth it even if you earn Rs 1 lakh (Rs 100,000) a month," he added.
Shah's plight highlights the struggle of first-time house buyers in Mumbai, still unable to purchase homes despite claims of reduced prices by developers. While Shah is despondent, other buyers are expecting further corrections in property prices and say that it would be better to wait a bit longer.
"We have been keeping a close tab on prices for the past one year. I think we will take at least six months before we take a call,'' said Manoj Kumar who works with ICICI Securities and was also hopping stalls to find a home.
Bankers at the exhibition, who were hopeful of attracting home buyers with competitive rates for loans of below Rs 20 lakh (Rs 2 million), were also unsure.
"We are getting as many as 500 enquiries every day during the exhibition, but we do not know how many of them will go for a house,'' said a State Bank of India official, who was present at the exhibition on behalf of his bank. "Where are the houses in that range in Mumbai? " he added.
State Bank of India is offering a concessional rate of 8 per cent only till April 30. After that the rate will move up to 8.5 per cent, which will be applicable for home loans below Rs 5 lakh (Rs 500,000) and 9.25 per cent for loans below Rs 20 lakh.
"People have clearly adopted a wait and watch policy on the prices,'' the executive added. Though prospective home buyers are flocking to the exhibitions, developers say genuine enquiries are drying up and the conversion rate has dropped.
For instance, Hiranandani group's Hirco had received 4,000 enquiries for its Panvel township in the last property exhibition held in October. This year, the company expects only 800-1,000 enquiries.
"Nearly 40 per cent of faces that we see at these events are same. We expect a conversion rate of 5 per cent from exhibitions like this, whereas earlier we used to see a conversion rate of 15 to 20 per cent during such events,'' said a manager with Hirco.
Hirco has sold 225 apartments out of 375 apartments it launched in Panvel, on the outskirts of Mumbai, in 2 months. "We launched only 373 flats due the current environment. Otherwise, we would have sold 2,000 apartments in two months during good times," he said.
Buyers agree that most of the top developers have launched houses in the mid-income segment and that their options have increased,but they are reluctant to take chances.
"Though prices are still high, they have fallen by small fraction. Earlier, we could not think of buying a flat, now we can look to buy one. But we will go only with reputed builders and completed construction even if we need to pay a little more,'' said Bhupinder Singh, a private bank execeutive.
"The developer's financial profile keeps changing very fast in the current downturn. If they do not get payment from buyers, builders will stop work. they will not pay from their pockets,'' he said.
However, exhibition organisers are hopeful of developers attracting genuine home buyers. "We expect at least 75,000 to 80,000 people walking in during the exhibition. Even if they visit 10 developers, people will buy from one though it will take at least 3-4 months,'' said Zubin Mehta, CEO, Maharashtra Chamber of Housing and Industry.