Property Forecast 2015 - A research by Makaan.com
The realty market in 2014 went thru a consolidation phase and did not witness any meaningful increase in property transactions. However, there was definitely a sentiment revival after the formation of the new government at the center and in some key states. The new government has announced several short term and long term measures to boost the sentiments of the sector. Announcements such as focus on affordable housing, increase in the income tax exemption on repayment of interest on home loan, increase in IT exemption limit, ease in FDI norms and development of 100 smart cities has started a long term positive trend for the sector. However, inspite of these moves high property prices & interest rates kept the home buyers away from the property market in 2014. The property transactions in almost all the major Indian cities were down for most part the year.
As we move into 2015, it is important to take stock of the overall mood of home buyers in terms of their desire, aspirations and fears from the upcoming year. Makaan.com, India’s fastest growing property site, conducted a research, “Property Forecast 2015” to gauge this trend. The key findings of the research are captured here
2015 will be an year for “end users”
The year 2015 will experience a very positive shift from the earlier years and will bring in the much required stability in the property market. Speculators and Investors have been riding the property market since a long time; however, they will make way for “end users” in 2015. Majority of home buyers i.e 39% want to purchase a property for self use as they are currently staying on rent. Another one-third home buyers want to buy property to meet the growing family requirements. Only 14% buyers want to buy a property for long term investment whereas small percentage (5%) are looking to buy a property as a short term (less than 2 years) investment tool. The scenario was very different in previous 3-4 years where majority of buyers were investors.
Property prices to remain stable in 2015
Property prices have remained stable over the past few months and the mood of the market suggests a continuation of this trend. Around 33% of home buyers feel that the residential property prices would remain stable over the course of 2015 whereas 27% of buyers expect the prices to go up from the current level with majority of them expecting an appreciation of not more than 10%. Few people expect that property prices will appreciate by over 10%. This should bring some relief to the buyers in 2015 as generally more than 10% appreciation is expected on a yearly basis. A total of 30% of buyers are advocating for the prices to go down from the current level.
For buyers “Location” is more important than “Price”
“Location” is the top most purchase consideration for home buyer in 2015. The preference for “Location” is even higher than “Price” that was the biggest influence for property purchase over the last few years. This is an important shift in behavior of the home buyer. Other factors that will influence purchase decision are Price, Connectivity and Proximity of the property to hospitals, schools and offices. It is interesting to note that only 8% of home buyers rate size as the top purchase consideration, which implies that majority of the locations have multiple property options available for purchase.
Affordable & Mid-segment housing will have sufficient demand in 2015
Affordable housing i.e., housing between 0-40 lakhs will continue to be a preference for majority of home buyers with almost 46% buyers opting for this. Mid segment housing (40 lakhs to 1 Crore) will be the preferred budget category for 31% of home buyers. High end housing (1 to 2 Crore) will be preferred choice for 15% of buyers whereas only 8% (over 2 Crore) of buyers will be looking for luxury housing. Among various type of properties “Apartment” is the preferred choice for people as high property prices and scarcity of land has made plotted homes or villas, out of reach of many buyers. Security, club house and community living contribute in making apartment the preferred option. Service /Studio apartment have gained popularity, however, they still account for a very small portion of the overall demand.
Factors that are keeping the buyers away from property purchase in 2015
High property prices has been identified as the single biggest hindrance in buying property in 2015. With more than 43% homebuyers considering high property prices as a hindrance. Other dampeners are that the 21%home buyers are unable to find their dream adobe closer to their preferred location and with the appropriate connectivity. They are either forced to compromise with an area or postpone the purchase of the property. Fewer respondents feel that high home loan interest rate is another reason. Lack credibility of developer and of absence of guidance are other hindrances that buyer face.
Our take: The past 2-3 years have seen several projects that have got delayed due to liquidity crunch, judicial intervention, land acquisition issues and environmental delays. This has kept buyers away from the market. To attract these buyers, developers are likely to launch projects where the payment is linked to possession. This will reinforce the confidence in the home buyers and will see a jump in transactions. The year 2015 will see property prices will move in a narrow range of 4-5% annually a more meaningful recovery is expected in 2016. Home buyers should use the next 12 months to firm up their plan before the prices move up in 2016. If you are an investor, you will be advised to look at the tier 2 markets which are likely to give better returns. Some markets that can be considered are Jaipur, Lucknow, Indore, Coiambatore, Nagpur, Surat and Ahmedabad. Some tier 2 markets are likely to give double digit returns owing to stable government at state and centre and superior infrastructure development.
Happy home buying in 2015!
The research was conducted among home buyers across Mumbai, Delhi NCR, Bangalore, Chennai, Hyderabad, Pune, Kolkata, Ahmedabad, Chandigarh, Indore and more and, we have got more than 1100 responses.