Connectivity, Public Transport and Down Payment attracts First Time Home Buyers
The property market in India has seen a lot of action over the past decade. Economic growth, high disposable incomes coupled with many financing options available, has made many young Indians look favourably at real estate investment.
So, what should a first time home buyer should consider when searching for a property? How does a home buyer think? To understand this and many more questions related to how does a first time home buyer think, Makaan.com, the fastest growing property sites in India, conducted a research christened “First Home Survey” that ran on the website between 23rd May to 13th June 2012 and witnessed a participation of more than 3953 first time home buyers from across the country including key cities of Mumbai, Delhi NCR, Bangalore, Chennai, Hyderabad, Pune, Kolkata, Ahmedabad, Chandigarh & more. Most of the survey takers were male, in the age group of 26 – 45 years.
The research brought forward two surprise findings. Click next for the findings.
First time home buyers prefer Down Payment plan (DP) over Construction Linked plan (CLP)
“Connectivity” is of greater importance than “Location”
This can be considered as a paradigm shift as far as home buyers psyche is concerned. Not so long ago, location was considered to be the most important consideration but as per the research findings 18% home buyers, now, feel “Connectivity and Public Transport” are more significant purchase considerations. This leaves “Location” to third position with only 8% preference. “Price” continues to be the top purchase consideration with 58% respondents opting for it.
Makaan.com's take: The preference for connectivity over location is not by choice. Home buyers are unable to find their dream adobe closer to their preferred location (in their limited budget) and are forced to compromise with an area 15-20 kms away from the main city. However, when it comes to choosing between available options, the one with better connectivity and public transport will win the race. This is evident from the fact that over the past decade areas that are connected through city metro or highways tend to appreciate more compared with other areas within the same city.
- Other findings of the research are in the coming pages -
I prefer a flat or apartment.
A first time home buyers start exploring for property options with a million dreams nurtured within. Their preferences give shape to their first home, whether they should go for a villa, apartment, studio apartment, or a builder floor. We asked what would be their preferred choice for a first home. 65% preferred Flats / Apartments, followed by Independent houses or Villas, which was favorite for 21% of the respondents. Independent / builder floor, Plot/Land and Service / Studio Apartment were other options in the list.
8% feel land or plot is ideal investment option for them to build their dream home as per their will. Only 5% and 1% opted for Independent/ Builder Floor and Service/Studio Apartment respectively as their investment options.
Makaan.com's take: The preference for an apartment is typically an urban phenomenon and reflects the sentiments of home buyers living in tier 1 & 2 cities in India. This could be because of the security and community living benefits that only an apartment can offer. Outside of tier 1 & 2 cities, India is predominantly a low density environment where the preference will differ from the above.
I was 29-35 years, when I first thought of my dream home.
Buying a home is a big responsibility. We ventured to find out at what age does a first time home buyer takes this big step. 45% agreed that they thought of purchasing their first home when they were in the age group of 29-35. Another 25% thought of owning a home before the age of 28, this reflects the mindset of youthful population in India. 18% felt they decided between the age group of 36-42, and 12% admitted they thought of it when they were 42 and above.
Makaan.com's take: The tendency among young generation to purchase a home at an early stage of life is going to increase in the coming years. With easy availability of finance and dual earning, the average age of a first time home buyers is likely to reduce from early 30s to late 20s in next 4-6 years.
I will buy a home for my family.
In Indian context wherein family values, tradition and virtues are respected, a home buyer in India typically buys a house for a family. First home buyers in India bought their homes for a family of 3-5 members. 42% survey takers said they got their home for a family of 4 members while 27% of the respondents bought their home for 5 members. Home buyers who got home for 3 family members are 20% of the total respondents and those who bought home for 2 members constituted 9% of the total respondents. Only 2% got the home for themselves.
My budget is under 40 lac.
Owning a house is a priority for most Indians today. Affordable housing i.e., housing under 40 lac continues to be a preference for 70% Indians. Around 42% of first time home buyers chose a budget between 20-40 lacs. Next is a budget less than 20 lacs with 38% of the respondents. For 15% budget is 40-75 lacs, whereas a budget of over 75lacs was preferred by decent 5% home buyers.
Makaan.com's take: The research brings out the disparity in the demand – supply equation in the Indian cities. Whereas most Indians are looking for a home less than 40 lac; the availability is this price bracket is limited, leaving demand far in excess of the supply. The supply in 75 lac plus is huge where-as there is limited demand in this segment, leading to unsold inventory. Real estate developers and policy makers will have to come to grip with this mismatch and take corrective action to solve this issue.
I can pay 10-20% Down payment.
Down payment is the first financial hurdle a buyer comes across in the home buying process. The research reveals that a first time home buyer can afford a down payment between 10-20% with 43% of the respondents opting for it. Next slab is that of less than 10% with 29% of the total respondents. Third is the scale of 20-30% with 14% respondents. Interestingly 8% respondents are willing to pay over 40% of the home value as down payment.
I prefer a “Ready to Move in” home.
43% of the first time home buyers are willing to go for ”ready to move in” accommodations whereas 36% are willing to go for “under construction” accommodations. While most home buyers are going for new homes, there are takers for old homes as well, 14% are willing to go for homes that are up to 5 years old. Takers for buildings that are 5-10 year olds are 4% whereas only 3% of the respondents are willing to take a house that is more than 10 years old.
Makaan.com's take: Ready to move-in flats are ideal for first home buyers as this will save them from spending on rentals & pre-EMIs. The risk factor of delays and hassles during construction is also nullified. The only concern with Ready to move in accommodations is that they are pitched at higher prices in comparison to the construction and time plans. Higher price also makes the ready to move-in flats less attractive from ROI point of view.