If somebody were to tell you that India’s residential real estate sector is going through turbulent times, you would hardly be surprised. Simply because you consider this as a given. Slowing sales, delay in construction, inventory overhang, mounting debt of developers, and above all, the liquidity dry up are all tell-tale signs that there’s something wrong with this once-booming sector. 
The NHB residential housing price index, the quarterly index data for April-June 2013 by the National Housing Board (NHB), also points to a fall in residential property prices in 22 out of 26 major cities across the country, ranging from -0.45% in Mumbai to -5.99% in Ludhiana, and a rise in four cities ranging from 0.55% in Dehradun to 3.07% in Nagpur during the same quarter compared with the January-March, 2013 quarter.
Is it the signal of a sharp price correction and beginning of the realty market’s end-game? Does it mean the real estate has lost its charm as one of the most preferred investment options in India? Far from it. 
As the prices have declined quarter-on-quarter, the question in every property buyer’s mind is whether to go on buying property now or wait for the golden moment to seal the deal. No doubt India’s residential property market is facing headwinds and the affordability of lakhs of buyers has been dented by the high interest rate on home loan and depressed growth, nevertheless when it comes to buying a dream home, an end user can ill-afford to wait for the economy to pick up and property prices to go down further.  Experts reckon that if you’re one of those prospective buyers looking to buy property for end-use, the time is now.

Slowdown, What Slowdown?
Despite some gloomy figures, concerns over slowing economy and high inflation, prices for residential property have refused to collapse, save for minor corrections in select pockets in the short term. On the contrary, if you see prices over a medium to long-term period, property prices in India are on an uptrend, making quarterly or short term fluctuations in prices immaterial. 
In cities like Mumbai and Delhi-NCR prices have gone through the roof in a matter of a few years. Jones Lang LaSalle (JLL) India, a property research and consultancy firm, recently came up with a recent report saying housing prices in Mumbai have shot up by 66% over the last four years. Cities like Gurgaon (in Delhi-NCR) and Bangalore too witnessed a whopping 52% and 46% appreciation in property price respectively in the same period, the report said.
Another set of price trend data by PropEquity, a Gurgaon-based real time data, analytics, intelligence and research Company, points to the rise in the weighted average price of residential apartments in major cities (See Show Me The Money). It shows between January-June last year to January-June this year prices in Gurgaon, Mumbai and Faridabad went up by a whopping 45%, 24% and 34% respectively. 

Seal The Deal
The subdued sentiment, depressed prices and rising inventory make up for a perfect recipe to go whole hog into making a deal, maintain experts. Even builders are pulling out all stops to woo buyers by offering freebies ranging from direct discounts to gold, free foreign trips, LCDs and more!
However, the fact that prices in top cities have gone down doesn’t mean prices are going to collapse from here. As Om Ahuja, CEO – Residential Services, JLL India says, “The NHB city indices suggest that the fall in prices in the most recent quarter has been largely a phenomenon limited to smaller cities such as Kolkata, Chennai and Hyderabad, rather than big metros. The data certainly does not signal an imminent price correction across the board.”
No doubt, piling inventory continues to be an albatross around the neck of developers. As per JLL estimates, Mumbai has a high inventory level of 48 months, Delhi-NCR 21 months, Bangalore 25 months and Chennai  17 months.
However, experts deny the inventory pile up would trigger sharp price cuts by developers, though they don’t discount a minor short-term correction, especially in the mid-income segment if it doesn’t impact the developer’s profitability. Most of these minor offloadings could be passed onto buyers in the guise of discount offers in the coming festive season. This minor correction would not be across the board but would depend upon specific projects and the builders’ holding capacity and financial strength.
In this case, this is the perfect time for home buyers sitting on the fence to buy their dream home now, as they could gain from appreciation over a long period of time.
“Buy what you can afford, when you can afford it. Actually, end-users are the only wise investors, because they are the only true long-term investors and real estate investment is a long-term game. Real estate always appreciates in the long run,” says Anuj Puri, Chairman & Country Head, JLL India. 
Adds Mitesh Kulkarni, Senior Vice President and Business Head, Mantri Developers, “Real estate prices in a few metros are at an all-time low. This is the right time for first home buyer to buy their dream home, as prices do not have much room to go down further and will rise as economy revives.”

Don’t Time The Market
Even though experts anticipate short-term pain to continue, if you’re an end-user you can hardly afford to time the market at the cost of appreciation from the current level, unless you are damn sure that prices may reduce in your location. 
“Real estate prices are a function of supply and demand. They will rise and fall according to how much demand exists in a certain location, and how much supply exists to meet that demand. The demand may be latent or active, but the fundamental does not change. If prices are high in a city or micro-location, it is because latent or active demand appears to developers to support them. In the end, the market will decide whether their assessment has been accurate or off the mark,” adds Puri of JLL.
Further, market analysts are of the opinion that the current slowdown in the property market is cyclical and it would be over once the economy picks up momentum. Then inventories have gone up primarily because of the slackening in demand, triggered especially by economic slowdown. However, they hope the unsold stock would be cleared over a period of two-three years.
Aditya Verma, CEO, Makaan.com, an online real-estate service provider says, “For the time being, one should invest in land, probably closer to an upcoming industrial or commercial hub. In the future, the same will offer a decent return. If one is going for an apartment, I suggest that one should verify each and every aspect of the purchase starting from location to approvals to delivery.”
Since property prices are likely to remain stable with a negative bias for at least 12-18 months, homebuyers can take time and bargain hard before closing the deal, he adds.

Ground Realities
There are certain underlying strengths of India's realty sector making it a good investment option despite the headwinds. First, there are still millions of Indians who don’t own a house despite having the financial capability to buy one. This has created a large pool of potential investors for whom buying a house is the biggest investment of a lifetime. A study by the World Bank conducted a couple of years back found that India faced a shortage of up to 70 million residential units, as high economic growth and rapid urbanization spurred overall demand for housing, especially in the 1-BHK and 2-BHK segments.
Another strengthening factor is the Indian middle class. The country has a mammoth English-speaking population and 300 million-strong middle class, whose growing aspirations would continue to add wings to the real estate sector. Another crucial factor that would continue to keep the realty flywheel spinning is the expansion of the services sector, and this is borne by the absorption of residential property in cities like Bangalore, Hyderabad, Pune and Chennai where the chunk of demand is coming from IT/ITES and financial services professionals. 
In Bangalore, for instance, the residential segment continues to witness healthy demand driven by job-security of buyers, and availability of products at all price points ranging from Rs 3000-20,000/sq ft, according to Macquarie Research. North Bangalore is seeing huge buying activity in expectations of price appreciation and creation of commercial facilities over a medium term.
Nevertheless, there are experts who seem to be pessimistic about the prospects of realty sector going forward and predict a hard landing of property prices sooner than later in view of rising inventory, high interest rates, tight liquidity and the upcoming general elections.
As Manish Bhandari of Vallum Capital Advisors says, “The current real estate price represents affordability of very few, while average users have to sell their twenty years of future earnings to afford a house. With such a grim situation on employment, the on ground reality and the unaffordable real estate price is sure to plummet like a pack of cards, shortly.”
Further he adds, “According to various estimates, an election for central government can cost upwards of $5-6 billion, while average state government elections costs around one billion dollar. With impending central and state election in ten states, costing around $15 billion, real estate will witness outflow of money to fund these elections over the next 18 months.”
So far so good. Real estate as an asset class has its own share of ups and downs like any cyclical asset. There are good projects out there at good locations and at attractive prices. It’s up to buyers to find it, bargain for good discounts and seal the deal considering your affordability, needs and investment horizon.