By Vinod Behl

Oct 27 (IANS): The surge in buyer sentiment, resulting in home sales picking up during the ongoing festive season, bodes well for the real estate sector. But with long-term confidence of buyers still not restored, a sustainable recovery of residential real estate may well take some more time.

The real estate market, reeling under a slowdown, has seen better home sales in this festive season in the run-up to Diwali, compared to the last season. Even the most stressed NCR market, which has a huge inventory overhang, has seen healthy sales. Some developers of NCR have reported 25-50 per cent increase in sales during the Navratras, with affordable and ready-to-move-in homes registering sharp sales.

Ahead of the festive season, there were clear signs of a pick-up in residential real estate sales. According to Liases Foras Real Estate Ratings & Research, the worst-hit NCR market saw year-on-year sales rising 12 per cent to 17.5 million sq ft (msf) in the April-June quarter. During the six month period from April to October (up to Dussehra), home sales in India's nine top cities have registered an increase for the first time over the last three years.

According to a report by real estate consultancy Prop Tiger, July-September purchases of new apartments by its customers increased 15-20 percent as compared to the same period last year.

There have been a lot of positives this festive season. A series of real estate reforms, including the Real Estate Regulatory Act, has boosted the sentiment of home buyers. Of late, unsold stock and delayed project deliveries have put capital rates under immense pressure. For the last several quarters, home prices have either remained under pressure or declined.

As such, the home buyers have been thinking that prices have bottomed out and with all the deals and discounts, this is the suitable time to buy. They also fear that as the residential real estate recovers over the next three or four quarters, prices will go up. This time, a lot of inventory is available in the secondary market with good deals for buyers to pick up, especially in the fast-moving affordable and ready-to-move-in segment. As affordability has been a major factor impacting the sales, a large number of affordable homes on offer, especially in Delhi-NCR, is positively contributing to increased sales.

Realising that safety of investment is weighing heavily on the minds of home buyers and investors, in the wake of large-scale delivery defaults, developers have taken to aggressive marketing this festive season, guaranteeing buyers peace of mind. They have been offering attractive packages comprising 100 per cent money back with penalty in case of non-delivery, no annual maintenance charges for a few years, no registration charges, no EMI till possession, fixed monthly rental till possession and beyond.

For the first time, NCR developer BDI group has come up with 10-year home warranty. In addition to substantial discounts and freebies, some developers, in order to restore the trust of buyers -- rudely shaken by the lack of transparency -- have come up with offers of all-inclusive pricing with no hidden charges. There are others who are showing transparency in disclosures like giving status of approvals and project completion, details of carpet area, amenities on offer and social infrastructure around the project.

There have been significant trends that are visible this festive season. Though online home sales have been taking place for quite some time, for the first time in this festive season, the auction of homes at the all-India level is being done by global property consultancy JLL India in association with Housebolo.com, guaranteeing quicker, easy and transparent sales with efficient pricing.

This time, there are more end-buyers than investors in the market as real estate, as an asset class, is not as lucrative as other asset classes -- particularly as investors in markets like NCR are facing the brunt of delayed projects and falling prices.

Short-term investors have disappeared from the market. Due to high unsold inventories, new launches have been far and few. As luxury real estate has been badly hit, the trend of affordable luxury homes is visible this time to give momentum to sales. Another significant trend witnessed during this festive season is that investors seem to prefer commercial property rather than homes as this has better prospects of appreciation and return.

Notwithstanding the sales boost and the hopes kindled by the festive season, real estate, especially residential, continues to face many challenges. Many end-buyers still don't find property prices affordable and banks failing to pass on rate cuts to consumers is another dampner.

As the Real Estate Regulation Act is still months away from getting operational, buyers are apprehensive about the safety of their investments. Additionally, property buyers are concerned that returns from real estate have dropped significantly vis-a-vis other asset classes.

According to an Assocham report, the unsold inventory pressure and excess supply continues to cast its shadow over residential real estate. It is the highest in the NCR, with 170,000 unsold units -- approximately 30 per cent of units under construction. Liases Foras has put the unsold stock in the NCR at 366.8 msf, followed by Mumbai Metropolitan Region with 266.7 msf. It is estimated that it may take up to three years to clear this inventory.

And considering all this, one has to perhaps wait for next Diwali to light up the home market with a proper bang.