NEW DELHI: Home sales in new projects across the country may have dipped in the last few quarters, but this hasn't affected the resale market where business is actually booming.
Even banks and housing finance companies are seeing a shift as homebuyers are not willing to take a chance with delayed projects. Nearly 70% of those taking loans are investing in ready or nearly-ready homes, which is in sharp contrast to last year's when 70% customers took loans to buy new homes and only 30% entered the resale market, says Destimoney, a company which provides home loans.
"Enormous delays in execution, liquidity crisis, high cost of borrowings and growing rentals are reasons why home buyers now want ready properties," says Sameer Jasuja, chief executive officer of property research and analytics firm PropEquity.
Home buyers, wary of delays, prefer to enter projects at a much later stage and are even willing to pay a premium rather than live with uncertainty. PropEquity's research shows that nearly half of the 930,000 under-construction residential units in India, scheduled for delivery between 2011 and 2013, are likely to be delayed by up to 18 months.
"Buyers are scared of an indefinite wait and are trying to mitigate risk. It is a good signal for the industry and will put pressure on developers to finish projects on time," says RV Verma, chairman and managing director of the National Housing Bank. "Developers should look at it as a caution signal."
"Prudence has come in as people are being careful today," says Renu Sud Karnad, managing director of India's biggest mortgage lender HDFC Ltd, which is expecting a 18-20% growth in home loan take-up in the April-June 2012 quarter.
In the January-March 2012 quarter, new home sales dropped by 57% in the National Capital Region, 58% in the Mumbai Metropolitan Region, and 18% in Bangalore. According to real estate brokers and consultants, a good amount of this business has moved to the secondary market.
"People are willing to pay a premium for ready properties," says Brijesh Parnami, chief executive officer, distribution, at Destimoney. In the past one year, along with property prices, rentals too have increased considerably. In Mumbai, rentals are up between 10%-20% depending on the location, while in Noida, rents have zoomed by 30% and above during the period.
"This is putting pressure on a number of prospective buyers who are jumping at the opportunity of buying a house they can move into so that they can save on rent," says Sumit Joshi, director of Noida-based real estate brokerage firm Real Credit Consultancy. In Pune, most end users today want to buy ready property.