Price gap between ready and under-construction homes shrinks to 3-7% in 2019

This could be because real estate developers are reluctant to hike prices of ready properties due to the prevailing slowdown in the property market and fear that it would dampen homebuyer sentiment

Representative image

Representative image

The average price gap between a ready-to-move-in (RTM) and under-construction (UC) home across seven cities has reduced to a mere 3-7 percent in 2019, a recent report by ANAROCK reveals. The same in 2018 and 2017 was 5-9 percent and around 8-12 percent, respectively.

NCR recorded the least RTM-to-UC price disparity at 3 percent while Pune saw the highest at 7 percent.

This could be because real estate developers are reluctant to hike prices of ready properties due to the prevailing slowdown in the property market and fear that it would dampen homebuyer sentiment.

The reducing price gap is highly favourable for end-users as well as investors. End-users prefer to see the end-product rather than a floor plan and are usually eager to get off the rental treadmill.

Investors previously chose UC homes for their lower prices and the compounding capital appreciation as projects neared completion.

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NCR recorded the least price differential at 3 percent between an RTM and UC home. Average price of an RTM and UC home was Rs 4,530 and Rs 4,410 per square feet, respectively.

In Mumbai Metropolitan Region (MMR), the price gap was around 11 percent in 2017, which has now reduced to a mere 4 percent in 2019. In 2019, the average RTM and UC price was Rs 10,460 and Rs 10,075 per sq ft as against Rs 10,365 and Rs 9,251 per sq ft in 2017, respectively.

Pune had the highest price difference between an RTM and UC home at around 7 percent. The average price of an RTM and UC home in the city was Rs 5,600 and around Rs 5,200 per sq ft, respectively, the report said.

“Previously, the ultimate selling proposition of UC homes was the significantly lower prices over RTM options," said Anuj Puri, Chairman - ANAROCK Property Consultants.

"The RTM premium was primarily on the 'instant gratification' quotient, immediate freedom from rent and zero construction risk. In the last two years, the price gap between these two categories has eroded YoY. In 2017, the price gap in the top seven cities was 8-12 percent. This reduced to 5-9 percent in 2018 and sank further to 3-7 percent in 2019. Along with the other benefits that ready homes provide, they attract no GST," he explained.

Puri attributes this reducing gap to developers' reluctance to hike prices of ready properties amid the overall slowdown. "In a market with limited housing sales, price hikes could dampen homebuyer sentiments further. Ready unsold stock will not find many takers if prices increase.”

In Hyderabad, the price difference is 6%. The average price of an UC home in 2019 was Rs 4,015 per sq ft while that of an RTM property was Rs 4,250 per sq ft.

Bengaluru witnessed a price gap of around 5 percent, with the average cost of a UC and RTM home at Rs 4,820 and Rs 5,050 per sq ft, respectively.
Moneycontrol News
first published: Dec 17, 2019 04:08 pm

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