Will this Diwali bring cheer to real estate?
Diwali special offer
Almost every industry in the domestic circuit rakes in the moolah during the Diwali time because the sales go up. Every company looks forward to this festival in the country. Real estate however, has been an exception to this trend.
“A research on the demand for residential real estate during the past five years shows that, contrary to the common perception that a majority of sales happen in the second half of a year, the absorption is largely the same in both halves,” observes Akshit Shah, assistant vice president, Capital Markets Research, JLL India. “A weighted average of the past five years shows that the first quarter attracts the highest number of deals at 27%, while the fourth quarter i.e. the festive season, attracts 25%, which is at par with the average,” he adds.
Industry players attribute slow sales during the first two quarters to the fact that most part coincides with school exams, which negatively impacts the sales as family decision makers tend to steer clear of major disruptions in the schedule.
In the third Quarter, sales tend to be subdued because of the monsoon season and Pitru Paksh, which is considered an inauspicious period for new beginnings.
Therefore, real estate developers used to bet big on the festival season. However, this tendency has changed. The theory that sales boost during festival season was true till 2010, when the country’s economy grew at over 9 – 10%. Being an investment-intensive purchase, property-buying has slowed down considerably in the recent times.
Shah further notes that the average age of home buyers has come down from the mid-50s to the mid-20s. “The younger generation prefers to take informed decisions and focuses on better bargaining opportunities rather than auspicious days to purchase property,” he adds.
The service industry which is a major contributor to India’s GDP at 55%, announces salary hikes and bonuses in the second quarter whereas, the manufacturing and trading industry announces bonuses during Diwali that is fourth quarter. Also, people from the upper-middle and high-income groups plan their investments during the first quarter, for effective tax management purposes.
Despite RBI’s monitory policy review meeting held during end September to slash interest rates, this year too, the real estate industry does not expect to clock in a great sale during Diwali.
