Are Move-in Ready Properties More Expensive?

26 Pages Posted: 24 May 2021 Last revised: 9 Jun 2021

See all articles by Arnab Dutta

Arnab Dutta

Price School of Public Policy

Richard K. Green

University of Southern California - Lusk Center for Real Estate

Venkatesh Panchapagesan

Indian Institute of Management (IIMB), Bangalore

Madalasa Venkataraman

Indian Institute of Management (IIMB), Bangalore - Century Real Estate Research Initiative

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Date Written: May 23, 2021

Abstract

A large share of residential properties on sale in developing countries is under construction. This is partly due to lengthy periods of construction. But purchasing under-construction properties can be costly and risky because of construction delays and the possibility of stalled construction. Hence, property sellers would expect buyers to pay higher prices for completed or move-in ready properties relative to under-construction ones. Prolonged construction times can also lead to higher resale prices. Buyers with an appetite for risk might purchase new under-construction properties at lower costs and resell these at higher prices, either when construction is complete, or when market prices increase, or both. In this paper, we use residential property listings data from the six largest urban agglomerations (UAs) in India - Bangalore, Chennai, Hyderabad, Kolkata, Mumbai, and Delhi - between 2010-2012 and estimate the sellers' expected premium for move-in ready properties in each UA. Hedonic regressions of listed prices on property attributes reveal that the expected move-in ready premium is statistically significant in Bangalore, Kolkata, Mumbai, and Delhi, and its magnitude varies between 3-14%. At unconditional average property prices, the move-in ready premium is 23-150% of an average household's income in these UAs. We also find that the expected resale premium is significant and varies between 2-16% in three UAs. The resale premium is partly explained by a higher move-in ready premium among resale properties and possible speculative behavior.

Keywords: Housing, Real estate, India

JEL Classification: R21, R22, R32

Suggested Citation

Dutta, Arnab and Green, Richard K. and Panchapagesan, Venkatesh and Venkataraman, Madalasa, Are Move-in Ready Properties More Expensive? (May 23, 2021). Available at SSRN: https://ssrn.com/abstract=3851745 or http://dx.doi.org/10.2139/ssrn.3851745

Arnab Dutta (Contact Author)

Price School of Public Policy ( email )

2250 Alcazar Street
Los Angeles, CA 90089
United States
3237096609 (Phone)

Richard K. Green

University of Southern California - Lusk Center for Real Estate ( email )

2250 Alcazar Street
Los Angeles, CA 90089
United States

Venkatesh Panchapagesan

Indian Institute of Management (IIMB), Bangalore ( email )

Bannerghatta Road
Bangalore, Karnataka 560076
India

Madalasa Venkataraman

Indian Institute of Management (IIMB), Bangalore - Century Real Estate Research Initiative ( email )

Bannerghatta Road
Bangalore, Karnataka 560076
India

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