PROPERTY PRICES in India have moved up in the last 12 months, according to a March report released by property research firm Makaan.com.
Makaan.com’s property index, which covers six cities, stood at 1,117 compared with 954 in the corresponding month last year, an increase of over 17%. The rise is attributed to the hardening of property prices in Mumbai and Pune, which rose by 29.4% and 28.1%, respectively. Prices in Delhi rose by 6.8% during the same period.
Hyderabad, Bangalore and Chennai that corrected by 3.2%, 2.5% and 1.4%, respectively, over the last one year also put pressure on the index.
The report said, “Prices fell in the first half (January-June period) of 2009 when the index dropped from 1,000 to 946. This period was marked by complete lack of interest among investors and homebuyers in making long-term high-value purchase decisions. As the economy started reviving, consumers became more confident about their future earnings. Property prices, too, started rising (July-December period) with the index reaching 1,128 in December 2009.”
November and December saw two interesting trends, the report said. First, developers in Mumbai, Bangalore and Delhi increased the prices of existing projects. Second, new launch prices were significantly higher than prevalent rates.
On the January to March period, Aditya Verma, business head and vice-president, Makaan.com, says, “This steep rise led to crowding out of homebuyers as they were caught off guard with this unexpected jump. This led to lower transactions during the January-March 2010 period.”
Various panels in the country are working on a property index to benchmark rates. The Reserve Bank of India has recently initiated an exercise to set up a housing start-up index to track new projects in 31 cities and measure the changes in construction activities. The National Housing Bank already has a property index that tracks residential rate movement in 15 cities.
‘Bancassurance is becoming important’
BANCASSURANCE, WHEN banks sell insurance, will play a major role in the overall development of the Indian insurance sector, says a survey released this week by leading global professional services company, Tower Watson. The new bancassurance benchmark survey, 2009-2010, says new business premium will rise to 40% of the total premiums collected by private insurers by 2012 from the current 25%.
Buying insurance at banks is becoming important compared with buying from individual agents. As per the survey, contribution of individual new business for life insurance increased from 5.4% in 2006-07 to 9.6% 2008-09 via bancassurance, while that sold by individual agents saw a decline from 88.6% in 2006-07 to 79.5% in 2008-09. Even as bancassurance has shown a steady increase, the survey also specified lack of motivation among bank staff to obtain a licence from the Insurance Regulatory and Development Authority (Irda). Steve Watson, director, product distribution and markets (London), Tower Watson, says “The true potential of bancassurance has not yet been reached and increased vigilance is needed as the channel expands to avoid the problems experienced in the other market expansion.”
The survey also states that banks predominantly sell unit-linked insurance plans (Ulips) to customers and do not show any significant interest in selling traditional or pure term covers.
In fact, sale of Ulips through bancassurance channels has generated 85% of premiums.
Given the potential of bancassurance channels, a committee is working on the distribution strategy and talks are being held on whether to allow banks to sell policies of a single insurer or more than one insurer.
Moreover, Irda is contemplating a different set of remuneration model for the bancassurance channel, where the commission on policies sold through banks may be lowered. The final recommendations are part of a draft Bill to amend the Insurance Act.
— Bindisha Sarang and Deepti Bhaskaran