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Introduction

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.

The major findings of the survey are highlighted here



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 in2011

The meltdown of 2008 and early 2009 saw the property prices correct by 25-30% in major Indiancities. 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. 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%).



About MakaanIQ

MakaanIQ, is an initiative by real estate website Makaan.com, to provide information, intelligence

and tools to help property seekers and real estate industry players take an informed property

investment decision. MakaanIQ offers a host of services for the benefit of the home buyers

including latest news on the Indian real estate sector and analysis of the property trends across

major Indian cities. The website allows home buyers to search for property for buying, renting or

PG. Home buyers can calculate their equated monthly installment (EMI) or check their

affordability by using some simple tools. The website has been integrated with Makaan.com

Property Index (MPI), a popular tool that offers up-to-date information related to the movement in

residential property prices.

Disclaimer

This report is based on the data gathered from home buyers during their participation in an online

survey on Makaan.com and is assumed to be accurate and complete. Makaan.com accepts no

responsibility if the data is not found to be accurate or complete. Property seekers are advised to

verify these findings before taking any decision. Makaan.com (People Interactive (I) Pvt. Ltd.),

gives no warranty, express or implied, as to the accuracy, reliability and completeness of any

information and does not accept any liability on the information which may or may not be subject

to change from time to time due to market condition.

http://www.makaan.com/

http://www.makaan.com/

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