The passing year witnessed insipid growth in the residential property market, with buyers turning cautious and hoping for a price correction and lower home loan interest rates. The developers managed to hold on to the ticket prices of their projects, but were forced to offer discounts to generate sales.
High inflation continued to play spoilsport as it prevented any substantial cut in home loan rates and left little investible surplus with buyers.
On the policy front, the RBI asked banks to exclude stamp duty, registration and other documentation charges from the total value of the home for calculating the eligible loan amount. It also restricted banks from lending more than 80% for houses worth over Rs 20 lakh. This means you will have to save more to buy your dream home.
The developers came up with new gimmicks to sell their projects. Instead of bringing down the price, they altered the meaning of affordability. If projects under Rs 30 lakh were touted as affordable two years ago, even the ones with a Rs 60 lakh tag were termed affordable in 2012. It's another matter that incomes did not keep pace to justify this 'affordability'.
The NRI buyers benefited during the year due to the depreciation of rupee against the dollar. "In places like Bangalore and Pune, the NRI investment helped the overall volumes," says Pankaj Kapoor, managing director of Mumbai-based Liases Foras.
Strategy for 2013
Property prices are unlikely to see a significant correction despite the low sales volumes, but discounts and freebies will continue this year too.
"Since the only way to catalyse healthier sales at this point is by offering buyers tangible financial relief, we are likely to see drastic trimming of frills in projects to make them more marketable from a pricing point of view, and innovative payment schemes," says Anuj Puri, chairman and country head, Jones Lang LaSalle India.
While this is a good sign for buyers, those willing to look around and bargain hard will benefit the most.
Also, keep an eye on the resale market, where many investors may be considering offloading their investments at a lower rate than being quoted by builders. The benefit could also be in terms of getting a ready-to-move-in house.
If you plan to take a home loan, this year will be better than 2012. Not only will interest rates be lower but the benefit will be passed on quickly to the existing borrowers.
However, project delays may continue as developers are still running short on funds and increasing construction costs have affected their margins. Most developers are banking on project sales to generate funds. So, if you are going for a property under construction, factor in some delay in getting possession.
If buying for investment, keep in mind that the quantum of appreciation came down significantly in 2012. It might reduce further in 2013.