A recent survey conducted by National Housing Board has presented a grim case for the Indian realty market. In around 22 important markets, property prices have dropped, including the cities that represent India’s new economy: Bangalore, Mumbai, Chennai, Pune and Delhi. After a whole decade of non-dipping growth which did not seem to have an upper bound, the nation is certainly experiencing correction in the realty market.
When it comes to the state of Goa, the situation is worse and villas and flats for sale in Goa which are worth several crores can be rented for thousands in a month. Large numbers of property in Goa are actually lying vacant because there are hardly any renters. It can be said quite clearly that the overheated and unsustainable market is experiencing a cooling period or bubble.
Most people living in Goa are long time property and home owners which is why they do not need to panic. Price for existing heritage homes and land in this Indian state is not experiencing correction and they would level off and flatten out in as much as a decade. However, gains in the past couple of years could retained is Goa maintains the widespread reputation of being a Mecca of civility and tolerance, offering the best possible living standard in India.
New buyers must be aware of the caveats. The outsized blocks of flat for sale in Goa which is coming up across several locations in the state, such as Reis Magos or Dona Paula in North Goa or the suburbs of South Goa such as Margao are heading towards the same fate as some of the ill planned properties in Gurgaon and Noida. In these upcoming cities, there has been a price decline of almost 20 percent because of irresponsible planning and property may be entering into downward spiral. Once regarded as reputed brand names, these developers are offering steep discounts and also subvention schemes where buyers need to pay small amount as down payment and get guaranteed bank loans and start paying for the property only after possessing it.
Some of these processes are already being repeated in Goa as more numbers of promoters are offering high discounts and all kinds of enticements and freebies which could not have been imagined for a flat for sale in Goa. However, unless investors feel the need to, they need not bite the baits as most analysts believe that realty development in Goa is much overpriced even now and shall not be as valuable in the coming years. The process of deleveraging may be underway in Goa right now as there are quite a few indications already.
Even some time ago HNIs from Pune, Delhi, Mumbai and Bangalore and even NRIs preferred Goa for buying a second property. After 2009, the realty market has seen lower interest towards investment by non-locals for residential properties. For reviving the market, the state government has raised the floor space index in suburbs such as Margao.
This elevated new project development and a sizeable supply was made available in 2011-212 in the market. Because of the larger supply base compared to the absorption capability of the region, developers had seen a phase of slower sales. For battling this, they raised the discounts on prices quotes, because of the slow turn in this market. The pressure on Goa’s residential market has been mounting for a while. The luxury and higher end projects have been affected more than middle end apartment projects. The interest from NRIs for buying villas and flat for sale in Goa is still quite low, especially for the luxury projects.
In the past couple of years, there has been an entry of larger national level participants such as Nitesh Estates, K Raheja Corp and Peninsula Land in the villa segment. Most of these villas cost more than Rs 2 crores and are for niche clients. The sales for such projects have been slow compared to expectations. When the market segment was analysed, most of the projects offered limited units and had positioned themselves quite uniquely. As the pricing points were higher, their sales had been quite slow. Even though there is low demand, prices have been flat in the past year.
A reason for the lukewarm interest among buyers for these villa projects which cost around Rs 3 crores or so is the larger ticket size along with slower growth of residential capital rates. It has been observed that in a 10 year horizon, a family which wants to spend a month in the year vacationing in Goa could stay at the plush hotels which charge Rs 20,000 a night during peak season, or Rs 40,000 for 2 rooms. Therefore, over a 10 year period, the amount that needs to be spent is Rs 1.2 crore, given that hotel rate escalations were squared off with discount rates for calculating Net Present Values. Therefore, the outflow shall be much less compared to what one must spend for buying a unit in the premium residential properties, particularly because the rise in capital values is much slow.
Most people in Goa come for the nightlife and beaches. A lot of premium residential developments are not properties on the beach front whereas hotels have close access to beaches and have rooms with view of the sea. Facilities too are provided to guests at these hotels. The NRI buyers realize this difference which could be another cause for the slowdown of the second home residential market in Goa.
When it comes to infrastructure development, Goa has had some activities for road development, which can be seen along quite a few arterial roads of the city. The hospitality business of the state has also seen significant investment in this city. Goa has had a sudden rush in the supply of hotels under construction. A latest international airport has been planned for the north part of this state. Because of the rise in tourism and bettered interest in this market and also the housing segment of Goa is closely related to brimming tourism industry, development of properties shall see positive and encouraging growth in the coming couple of years.