Home buyers expectations from new year - Property Trends 2011
The year 2010 can be considered as a mixed year for the Indian real estate sector. The industry displayed some positive signs of revival with homebuyers & investors coming back to the property market on the back of a higher consumer confidence and the promise of sustained GDP growth.This lead to hardening of the property prices in the beginning of 2010. The home prices moved up at a brisk pace during Oct 2009 to March 2010.The sudden and steep rise in prices created a fear in the mind of the genuine homebuyers and they adapted a wait and watch approach during the second half of 2010.
The year 2010 also saw RBI tightening the flow of “easy money” into the Indian real estate sector. Steps like increase in risk weight age on bank lending to realty companies, ending the teaser home load regime, higher provisioning for home loan above 75 lac and RBI’s overall guidance towards high interest rate regime brought some sanity in the property market. The end of 2010, exposed glaring gaps in the procedure adopted by some banking officials in sanctioning loans to the realty companies. This disclosure by CBI along with RBI interventions kept the property prices under check for the second half of 2010 and prevented a potential bubble from being formed.
As we move into 2011 there are several un-answered questions. Where does the market go from here? What is the current psyche of home buyers? Is it still a seller’s market? Is affordable housing still the top priority when the common man goes home shopping? Which is the hottest destination for investing in real estate in 2011? To ascertain all such trends, Makaan.com, the fastest growing online real estate website, conducted a national survey for Metros and Tier II cities of India. Christened Property Trends 2011 - the survey was conducted online in the month of Dec 2010 (between 1st & 20th Dec 2010). It saw participation from over 4700 home buyers who were in the age group of 26-45 years.
Home buyers want more tax rebate on repayment of housing loan
The Indian real estate sector has gone through major ups and downs in the last 24 months. When asked to give their advice on one thing that will have a positive impact on Indian realty sector in 2011, nationally, 32% of home buyers wished for increase in income tax exemption limit on repayment of interest on home loan from current 1.5 lac p.a to 3 lac p.a. This is understandable as the current limit of 1.5 lac has become insufficient (when seen in light of the jump in property prices over the last 5-7 years). The limit has not kept pace with the price rise and hence should be revised upwards.
Next advice from the home buyers is to resolve the constant conflict of super area Vs carpet area. 31% of home buyers have suggested that the developers should only charge on the carpet area rather super area. As per them this will bring more transparency, as carpet area is measurable as against the latter which in most cases is ambiguous. Another 12% home buyers believe that developers should start charging only after the project construction is completed. This will put positive pressure on the developers to complete their projects on time. 11% feel that to attract more genuine homebuyers there should be a 3 year lock in period for property seekers. 10% feel that government should subsidize home loans by 200 points (or 2%) of the market rate. 4% are of the opinion that pre launch of projects should be stopped / banned.
Home buyers predict increase in home loan interest rates in 2011
When it comes to buying a house; arranging funds becomes the most important aspect, especially in case of a working professional. It is only with the help of a home loan that a buyer can think of making a property investment. In the current scenario when RBI is advocating for hardening of interest rates; home loans are likely to increase in 2011. When we asked the survey takers on how they felt home loans would move in 2011; majority expected the home loan rate to move up in 2011.
49% of national home buyers feel that home loan rates are expected to increase in 2011. We have already seen banks withdraw teaser loan rates which have become extremely popular in the past 2 years. The new directive from National Housing Board (NHB) is also towards greater provisioning on part of banks for all lending to housing sector. 26% home buyers are more optimistic and feel that interest on home loans would fall in 2011 (this seems unlikely). The rest feel that home loans would remain stable over the coming year.
Home buyers hoping for significant correction in property prices in 2011
The meltdown of 2008 and early 2009 saw the property prices correct by 25-30% in major Indian cities. Post meltdown period saw a very smart recovery during the second half of 2009 & 2010. Today the property prices seem to have come full circle in major Indian cities. The sudden drop followed by an equally sharp rise, has left many homebuyers wondering regarding the genuineness of these moves.
An overwhelming majority of national home buyers are expecting a correction in property prices in 2011. A major chunk of 40% are expecting property prices to correct by upto 20% while another 15% are more optimistic and are expecting a correction of more than 20%. This is in line with the popular sentiment in the market. On the other hand 18% are of the belief that property prices would rise in 2011. The remaining 27% are predicting for stability in property prices over the next 12 months.
Indian real estate will be driven by the end user in 2011
2011 is going to be yet another year that will be dominated by end users. With improving economy and better job security; home buyers seem more confident for making a property purchase in 2011 (with some help in the form of a price correction). We asked home buyers on the main reason for buying a house in 2011.
A whopping 70% of the national home buyers want to buy a house for self consumption. It is interesting to know that 20% are looking at buying a house purely from long term investment (time horizon more than 3 years) and another 10% are looking at investing for short term (time horizon 1-3 years).
Mumbai is the most preferred investment destination in 2011
Owning a house is a priority for most of the Indians today, we asked home buyers on their choice of city for making a real estate purchase in 2011. The results show that metro cities continue to attract majority of seekers with 77% of the national respondents wanting to buy a house in the 4 major cities of India (Mumbai, Delhi, Pune and Bangalore).
Amongst all cities Mumbai is considered to be the most sought after location for real estate investment in 2011. 36% of home buyers want to own a house in the city. Mumbai occupies a special place in hearts of many Indians, who are attracted towards the city due to its diverse work force, employment opportunity, cosmopolitan culture and glamour. Property in Delhi follows Mumbai with 20% buyers willing to buy a property here. Delhi has witnessed healthy growth in infrastructural development with a new international airport and spread of metro services to the NCR region. This will attract higher adoption in the coming years. Among the other major cities Pune (11%), Bangalore (10%) & Hyderabad (7%) are the key real estate investment destinations of 2011. Beyond the top five cities, homebuyers have shown a preference for Ahmedabad (4%) Kolkata (3%) and Chennai (3%).