Broker Underwriting: A New Trend in Metro Real Estate
Metropolitan real estate markets are experiencing a period of stagnation, with prices remaining unchanged for over a year. This has led to buyer hesitancy, including among investors, leaving real estate brokers grappling with a challenging sales environment.
Industry experts observe that real estate developers, particularly in the National Capital Region (NCR) and the Mumbai Metropolitan Region (MMR), are facing a significant cash crunch. To mitigate this financial strain and maintain property prices, developers are increasingly turning to brokers to underwrite their projects. This strategy artificially inflates sales figures, giving a misleading impression of market activity.
"So as the new real estate projects that are launched, brokers underwrite a bulk of apartments and the developer can show it as sales," explained Sachin Sandhir, Managing Director of the Royal Institution of Chartered Surveyors (RICS). This practice allows developers to present a facade of robust sales, potentially masking underlying financial difficulties.
Kaustuv Roy, Executive Director of Cushman & Wakefield, highlighted the crucial factors for a healthy real estate market: "For the whole system to work two things are very important, first there should be buyers in the market and second the prices should continue to increase at a faster rate." The current market dynamics, characterized by stagnant prices and hesitant buyers, pose a challenge to these fundamental requirements, according to Roy. The underwriting trend further complicates the situation, potentially obscuring true market demand and hindering accurate price discovery.