Home Buyers' expectations from the new BJP led Government:: Research done by Makaan.com
India has seen a decisive electoral mandate after a long gap and we have a stable government at the center. All industries are excited about the outcome of the general election. There are talks of sentiment improvement in the real estate sector too. With the intention to gauge the expectation of home buyers from the new BJP-led government, Makaan.com, India’s fastest growing property site, conducted a research in the month of May 2014 among 1400 home buyers in the cities of Mumbai, Delhi NCR, Bangalore, Chennai, Hyderabad, Pune, Kolkata, Ahmedabad, Chandigarh, Indore and more.
Key expectation of Home Buyers’ are:
1. Home buyers are excited about the positive impact on real estate & are planning a property purchase
Home buyers were sitting on the sidelines for the past 1-2 years, hesitating to put their hard earned money in the property market, waiting for the economy to revive. This mood seems to have given way to a more optimistic sentiment. When asked whether the new government arrival will have a positive impact on real estate sector, the majority, 80% of home buyers answered in affirmation. The development agenda, which was the central theme of the election campaign, seems to have created a resonance among the Indian home buyers and they counting on the new government to keep its promise. It needs to be seen whether the new government will consider the aspirations of the home buyers and give them enough reasons to smile.
To check, if this positive sentiment will lead to increase in actual transaction, we quizzed home buyers on their intention to buy a property. A sizable number percentage (38%) are extremely excited and are planning to buy a property in next 6 months. Another 34% expressed their intention to buy property in next 12 months (see chart below).
2. Homebuyers expecting drop in property prices
Property prices have remained stable over the past few months and the mood of the market might change to a drop in property prices. 26% of home buyers feel that the residential property prices would drop of over 10% in the coming 12 months. Almost an equivalent number expect the prices to remain stable. 19% of buyers expect the prices to go up from the current level with majority of them expecting an appreciation of up to 10%. This should bring some relief to the buyers in the coming months. It is widely debated that the real estate prices can be brought down by 10-20% just by simplifying the procedural delay and by offering clarity to developers regarding approvals. The government has already indicated that they would look into the issue.
3. Budget of Home Buyers is likely to remain the same, after the announcement of new government
The budget of the Indian Home Buyers has remained the same in-spite of the economic slowdown of the past few years. 62% of buyers are willing to spend the same amount of money as they have budgeted for, around 1-2 years back (but were waiting for the right opportunity). There are 30% of buyers who have reduced their budget allocation while there are another 8% who are ready to dish out more money for property buying.
4. Property investment budget for home buyers is 0-40 lakhs
Owning a home has been a priority for Indians since ages; it is treated as a symbol of financial stability and social status. Affordable housing (budget upto 40 lakhs) will continue to be a preference for majority of home buyers with almost 60% buyers opting for this. Mid segment housing (40 to 75 lakhs) will be the preferred budget category for 27% of home buyers. High end housing (75 to 125 Lakhs) will be preferred choice for 8% of buyers whereas 5% of buyers will be looking for luxury housing (budget over 125 lakhs). There seem to be an expectation that the new government will take steps to boost affordable housing so that people can realze their property dream. It needs to be seen if this demand will be attended to or not.
5. Location and Price continues to be the top purchase considerations
“Price” will be the top most purchase consideration for home buyers. The preference for Price (35%) is higher than Location (30%) which was the biggest influencer for property purchase last year. This is an important shift in behavior of the home buyer. Other factors that will influence purchase decision are Connectivity & Neighborhood (proximity to schools, hospitalsetc) with 15% of buyers going for them. It is interesting to note that only 5% of home buyers rate size as the top purchase consideration. Major part of the real estate cost can be attributed to the land and construction cost. It needs to be seen if there will be some incentive from the government to offer subsidized land and Bhartiya Nikoo Homes Bangalore specially for residential housing projects.
6. Interest on home loans will fall over next 12 months
Availability of cheap home loan is the greatest gift a home buyer can get from the government. At least that is what they expect. Makaan.com asked them what will happen to interest on home loan and interestingly 68% of home buyers feel that the home loan interest rate will fall from the present level. Another 20% feel that Interest rates has no link to the new government whereas only 12% feel that rates will rise from here. India’s mortgage rate are among the highest in world and have remained so for the past 3-4 years. Currently the range is from 10 – 14% depending on the cost of the fund for lenders. It is widely expected that government will announce measures in the forthcoming budget that will directly or indirectly, lower the interest rate burden on home buyer. This can be done by giving industry status to some identified segment within real estate. Another way can be to include home loan in the priority sector lending for banks. Additional relief from Income tax on payment of home loan interest rate will also be an encouragement.
The overall conclusion is that homebuyers have high hopes from the new government majorly on the interest rates on home loan and they are looking for affordable homes. Hope to see some changes with the new government coming in.