Devesh Chandra Srivastava
Real estate remains at the top of the buy list for Indian investors. After the first home is bought and paid for, the search for the second one begins. Capital appreciation, rent, inflation protection —all remain the reasons why real estate continues to be popular.
Mint Money along with property portal Makaan.com conducted a nationwide survey across 12 cities (Delhi/NCR, Mumbai, Bangalore, Hyderabad, Chennai, Ahmedabad, Kolkata, Pune, Chandigarh, Kochi, Coimbatore and Jaipur) and incorporated responses from 1,430 participants. The aim of the survey was to find the mood and appitite of the second homebuyers.
The survey spans age group between 18 and 55 years and above. But the maximum number of respondents are between 25 and 45 years of age.
Of the 1,430 respondents, 33% say they do not see any slump in the Indian real estate market. About 35% are unable to comment if the real estate market is witnessing a slowdown. Normally, sales across primary market (new launches) depend upon the robustness of the secondary market or the resale market. Investors who transact in resale market invest primarily at the initial stages of a project. “The resale market is currently witnessing a dip in demand because of the continuous price hike. Despite the slowdown from 2008 to mid 2009, real estate market bounced back and is now witnessing a price hike. This has led to an overall lowering of buyers’ sentiment,” says Harmit Chawla, managing director, Hcorp Realty Pvt. Ltd, a New Delhi-based real estate company. However, 37.27% homebuyers want to invest within six months in the real estate market, the survey finds. And around an equal number want to invest after 12 months. Let’s assess why people look for a second property.
High rental yields, appreciation of the invested capital amount, financial security and family requirements are the primary reasons to buy a second property. And it is also because of the divergent market indicators they want to be rest assured that their investment is safe.
More than 47% of respondents plan to buy a second home because of the increasing size of the family. However, almost 40% look at second home either as a tool for financial security or as a means for steady rental income. Prashant Solomon, managing, Chintels India Ltd, a New Delhi-based developer having projects in Gurgaon, “Property prices have never come down despite the slowdown. Thus, a second property also becomes the best asset class in terms of securing one’s money. Second homebuyers often park their extra income by buying a second property in either the same city or some other tier-II city.”
Demand for affordable houses
Though builders have been focusing on the premium category, the demand is still predominant in the affordable segment, indicates the survey. A significant portion of the existing prospective second time homebuyers are looking for an affordable option. At least 78% of the respondents in the survey said they want to own a property that is under Rs.40 lakh. Around 16% said they can invest in properties between the price range of Rs.40 lakh and Rs.1 crore. According to the survey, very few fall in the category of those deep-pocketed buyers who have the ability or willingness to buy a second property worth at least Rs.1 crore and above.
If you are looking at real estate purely for investment purpose, the highest returns would be from affordable and mid-range housing rather than premium and luxury housing for which demand is not so high. “Since sales across premium and high-end categories are under slight stress, affordable category continues to generate a lot of investor interest. Thus, in the current scenario, an apartment under Rs.50 lakh is the most saleable,” says Shveta Jain, executive director-residential services, Cushman and Wakefield India, an international property consultant firm.
You may be living in a bungalow or an independent floor, but it is apartment projects that are drawing the maximum number of buyers. The survey found that people prefer apartments to independent houses, farmlands or plots: 43% respondents wanted to buy an apartment while only 37% want to purchase a plot as their second investment in real estate.
However, metros and tier-I cities emerge as investment destinations with 51% wanting to invest in these cities only. “Since prices in the metros and tier-I cities are not below Rs.5,000-6,000 per sq. ft, buyers reduce their (the apartment) size to buy apartments in these location,” adds Jain. As much as 33% respondents want to invest in tier-II cities.
The other reason for such inclination could be the security that the apartment projects provide. Chawla adds: “Moreover, buyers are saved from the hassle of construction.” Interestingly, very few votes are for farm houses and villas. While 14% would prefer to buy a villa, only 7% of the respondents prefer to buy farm houses.