A great time to buy

The overall home market in Bangalore has grown phenomenally in the last five years. Today, the market is over Rs 12,000 crore every year, about Rs 1,000 crore, or two billion dollar worth of purchases every month. The Indian festive season always brings with it a boost in demand for real estate - both in the residential and commercial segments. “The increase is usually to the tune of 20-15% during that period. However, we have witnessed a sea-change in buyer sentiments after the slowdown - the demand for property is no longer driven by factors like tradition, but by the availability of good deals at rational prices. I do not expect overall sales to increase by more than 12-15% during this year’s festive season,” says Karun Varma, Managing Director (Bangalore & Kochi) Jones Lang LaSalle India.

With the need for affordable housing growing, homebuyers have taken advantage of the low real estate prices to invest in real estate before the market rates increase again.
“Another reason for the boost in demand for homes would be the early arrival of the Ganapati season this year. More people decide to invest in real estate,” says Hemal Jain, Business Development Head, Neev Homes. Adds M R Jaishankar, Chairman & MD, Brigade Group, “We see festivity as a time of contemplation for many buyers. Buyers who are on the fence often come back after the festive season to make a booking.” Because most salaried professionals get a bonus at this time of the year, home purchases are made.

Demand drivers

With most majors recording strong growth results in Q1 and home loan teaser rates still being offered, real estate is in for good tidings. Chandrashekar Hariharan (CEO & Co Founder BCIL Zed Homes) says, “proactive response on clearances from urban planning authorities, increased ethics from builders with full compliance of norms, greater innovation when it comes to efficiency in systems for water, energy and waste management are some factors spurring demand.”

While the festival season is likely to bring a certain degree of temporary effervescence in residential sales, one cannot read too much into this in market terms.

“We are certainly seeing a significant return of interest in home buying this year, but a sustainable revival depends on a number of macro factors. However, the demand will be firm because investors in homes fear property prices will increase further,” says Rajesh Goyal Managing Director, RG Group.

The factors that have boosted the demand are growth in economy, improved job scenario, increased income levels and effective interest rates.

“It’s one of the best times to buy a home because while economic stability has come back, real estate prices have not yet touched the peak of 2007,” explains J C Sharma, MD, Sobha Developers Ltd. According to McKinsey Global Institute 2010 report, housing shortage in India is expected to increase from 25 million units in 2007 to 38 million units in 2030.

Ashok Iyer, Country Head, Sales & Marketing, Shriram Properties adds, “Housing Finance Institutions (HFIs) are offering attractive interest rates; loan clearance is faster; liquidity is high and realty returns are good; corporate India is on hiring mode, rentals are going up reflecting gap between demand and supply.”

The biggest factor that will drive demand is the need for good quality shelter with clean marketable title. “It has been variously reported in the past the basis of data published by the banking and housing regulator that the existing stock of 25-27 million housing units is expected grow by 25% till 2015. The majority of new growth will come from affordably priced housing in the top 30 cities. The key is to bring in the benefits of securitisation while avoiding the excesses that led to the recession that began in the western world,” says Vinaya Chandran, Vice President - Marketing Strategy, CoreLogic Global Services. Realistic pricing across segments would instill confidence in prospective customers that their dream home is within reach. “With interest rates slowly but steadily going up in the next six months and with price correction already having occurred, owner-occupiers believe that this is the right time to buy a home to move into,” says T S Sateesh, Managing Director, Hoysala Projects. Improved market sentiments post economic revival and the resultant income stability provide the right macro environment for home buyers. However, they are seeking value in whatever kind of housing option they are looking for and also want to ensure that the project will be delivered as promised both in terms of quality and timeliness of delivery.

A word of caution

Having just emerged from an extreme cash-conservation mode, buyers are focusing on actual value, not freebies and meaningless incentives. Cautions Vineet Singh, Business Head, 99acres.com, “As a home buyer one should know that the economy has still not fully recovered. Realty rates have also increased by over 30% in the last 12-15 months. Commercial and retail segments are still witnessing over-supply and sluggish demand. But it is a good time to buy your first home and even to invest in real estate.” Adds Goutam Chakraborty, Regional Director, Office Leasing & Sales, Colliers International, “A genuine buyer should do a proper market research and should take professional help to be sure that he is getting a real good deal.” In an economy that is in the recovery mode, it is important for the developers to continue to offer housing options to cater to the real need in the market, with rationalised pricing.

“On the other hand, customers need to continue being careful about the property they are purchasing and not get swayed by empty promises. They should focus on projects which have adequate funding back up as well as demonstrated action in the form of all-round construction on the project site,” says Sanjiv Aundhe, COO, Fire Luxur Developers. Rustom Bharucha, MD, PRA Realty (I) Pvt Ltd. adds, “I think we are well on our way out of the recession as evidenced from the buoyant demand we are seeing the last three quarters across the country. Having said that developers still need to give buyers firm delivery dates and quality construction is another important aspect that would endorse the faith of potential clients.”

‘Value for money’

Dhiraj Jain, MD, Mahagun Real Estate Pvt Ltd says, “The concept of ‘value for money’ is very important today. The customer is aware of the pros and cons in the sector so the commitment to quality at customer oriented pricing is the most important factor to be taken care of. Secondly, capitalisation on long-term benefits should not be ignored.”
After the sharp increase in prices over the last one year, capital values are expected to remain flat in the remaining months of the year for many of the precincts. The recent sluggishness in absorption in some of the residential micro-markets may dissuade any significant increase in capital values.

 Additionally, relatively lower prices of the newly launched projects may keep a check on the average capital values for many of the residential micro-markets.

Says Shailesh Ghorpade, CEO & MD- Azure Capital Advisors Private Limited, “The only deterrent to house purchases is confined to a few micro markets where there has been an unusual escalation in property prices over the past 12-15 months. This has impacted affordability and people here would do well to wait for a correction before investing.”
Says a spokesperson at Omkar Realtors & Developers Pvt Ltd, “Recovery from recession demands that the developers do not hike rates that make a project exorbitant. At the same time, they cannot compromise on the quality of infrastructure and construction. It is of utmost importance to build higher levels of trust and transparency by administering design and product innovation in connection with their projects.”

Be a smart buyer

In the present recovering scenario, one has to be a smart and informative buyer.
“Firstly, a property buyer should invest only with a reputed real estate company with stable track records. Once a buyer has decided on his budget and real estate company, the next step is to choose from various banks offering property loans. A bank offering the best ROI should be considered, also understanding other implications,” says Manu Goswamy, Head Marketing & Sales, Jaypee Greens. Joseph Nivin, Vice President - Property Services, Geojit BNP Paribas Financial Services Limited adds, “now is the time for the builders to look at affordable housing as well as rural markets or even tier III cities. Plotted development or villas would be a better bet than high rise structures.”

The growth rate of the Indian economy is largely on account of domestic consumption. “The risk of downside in the economy is low. The price of homes will not fall. In fact the bias is upward. One of the risks that we face is of inflation. Real estate is always considered a good hedge against inflation. Therefore, it is better to buy sooner than later,” opines Ashwini Kumar, Chief Operating Officer, Nitesh Estates Ltd. The price sensitivity in the market is clear.

 “We will find straight and transparent dealings with honest prices and value based deals coming to a closure. The fence sitters have moved and either crossed the fence or backed off. The end users are the most active segment in the market and they are very cautious with their money. Everyone is looking for the best bang for their buck,” concludes Ravindra Pai, MD, Century Real.