House within the Choice

The year began with a bang for the Property sector. It seemed as if the property rates would defy the law of gravity forever, as buyers didn’t seem to mind paying a fortune to acquire huge houses with modern amenities. However, thanks to the economic slowdown, the picture has not been rosy since the second half of the year. According to real estate experts, the scene is going to change and 2009 is going to be a better year. And, according to them, action is going to be in the affordable housing segment.

“Higher interest rates, inflation, large house sizes and economic slowdown have spoiled the mood in the real estate sector since the second half of the year. However, November-December period has been better one for the sector,” says J S Augustine, executive director, Joy Reality. “There is considerable amount of pick-up in affordable housing segment. All the new projects which have come up with affordable budgets and convenient location have seen good demand.”

However, real estate pundits believe that it will take a while before the segment bounces back. “The recent interest rate concessions on low cost housing have fuelled hopes of further sops. But, most people are still waiting for property prices and interest rates to come down further,” says a real estate expert.

According to real estate analysts, prices of property have already come down by 20-25% in smaller cities, and there have been price corrections in certain pockets in metros too. “Developers are reducing prices in their individual capacity already. People who have acquired land at lower prices have already cut their prices and getting good response from prospective buyers. But, developers who have bought the land at higher price would find it difficult to cut prices,” says Augustine.

“The number of queries has increased considerably in recent times. I am hopeful that if interest rates continue to fall further, things would improve dramatically in the next three months,” says Dharmesh Jain, managing director, Nirmal Group.

India Real Estate players are also hopeful that the recent interest rate concession for houses below Rs 20 lakh could spur demand for second homes or weekend homes in the outskirts of major cities. “Once customers become convinced that the property prices and interest rates are in line with their budgets, they would start looking at this option. However, it is not likely to happen immediately,” says a senior banker. According to Augustine, the sops could actually prompt players to look at even first house in a faroff location.