NCR Realty market is a Broker-Investor driven market, especially for new projects with price increases driven by this model rather than robust end-user demand.
Modus Operandi of NCR Realty Market - The syndicate of brokers and investors continues to be the leading cause for developers in NCR touting high booking figures a few days after a project launch. The game plan here is for brokers to submit the booking amount on behalf of their investor clients, wait for the developers to increase prices by 10% in a year's time, by which time construction activity becomes visible on the project and the lock-in period expires off-load the booked apartment to another category of investor, who is willing to invest more for another >20% return, and move the original amount plus the profit to another newly launched project.
Prices have to continually increase for this model to be viable and for investors to remain interested and, in our view, this is the reason why we have seen a sharp ~25% increase in prices in Gurgaon in the past 12-18 months despite a slowing economy and high interest rates.
The developer also has to be careful not to start aggressive construction on the project before most investors have offloaded their holdings, otherwise the investor may balk at putting up more money, which could hurt the project cash flows.
This model is akin to riding a tiger where getting off may mean being swallowed and, we think, we are reaching close to that point. If developers fail to increase prices from hereon, their sales from new launches will slow down as investors will be uninterested and if they increase prices from these already unaffordable levels the end-users / later stage investors will refuse to purchase.
Thus Be EXTRA CAUTIOUS While BUYING Property in Delhi NCR especially with the following Builders who are in this Broker-Developer-Investor Nexus Amrapali, RG-Group, Unitech Jaypee, Raheja, Sobha, Chintels, ATS, DLF and SARE.
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