Ground Realities of real estate
Home Truths - Checks Out The Ground Realities And The Best Scenario For Consumers
Developers say property market growth hinges on fall in home loan interest rates but banks, taking cue from global disasters, are playing it safe.
Heard the buzz around falling realty prices? And the fact that even interest rates are set to see a downward revision. Well, you may get tempted to start looking out for your dream home, but hold on. There's still a gap between the proverbial lip and the sip.
Most developers have indicated that it's difficult for them to squeeze margins further and more price cuts won't be feasible for them. DLF chairman K P Singh, for instance, recently evaded the question about price cuts. "A number of taxes have been imposed on the real estate sector. These need to be rolled back for a push in demand. Prices are a function of demand and supply and in the current scenario, supply is in excess of demand," said Mr Singh at an Assocham meet.
The situation is the same with other realty players, who are tight-lipped about any further revision in prices.
In such a situation, what options does a prospective buyer have? In fact, coming back to interest rates, what really is an ideal home loan rate in the present situation? Says Anuj Puri, chairman and country head of global real estate consultancy Jones Lang LaSalle Meghraj (JLLM), "The `ideal' home loan rate from the borrower's point of view is obviously the lowest. From the banking system's point of view, the most workable interest rate is one that is high enough to make lending reasonably profitable, yet low enough not to discourage potential borrowers. We will not see alltime lows like 7% again, but a workable rate of interest would be between 8.5-10%."
While PSU banks recently announced a rate cut of 50-75 basis points (bps), private banks are still to do the same. Says Renu Sud Karnad-Joint, MD of HDFC, "The current floating interest rate is 11.75% irrespective of the amount and term. The fixed rate is 14.25% . This is a pure fixed rate without any condition or right with the lender to increase the rate. Our interest rates are a function of our cost of funds. We have always passed on the benefit of lower cost of funds to our customers and we will continue to do the same."
Agrees an ICICI spokesperson, "The interest rate is 13% for floating loans and 16.5% for fixed. We continue to watch the market situation on a dynamic basis." But while private sector banks have not increased margin money on loans, some PSU banks like State Bank of India (SBI) have increased margin requirement by 5-25 percentage points.
The current interest regime and low demand has made developers offer value buys for the buyer. Many major developers such as Omaxe, Parsvnath and DLF have even shifted focus to affordable housing to boost demand. In fact, slack demand for housing and high interest rates have made developers offer value buys to counter the present situation. SVP Builders, for instance, is providing special time-linked plan for the buyers. TDI also has a scheme for a new project wherein customers can pay own their apartments by paying Rs 9 lakh as booking fee and the rest in EMI on possession after two years.
There are a host of other factors that play a crucial role in impacting a customers decision. A wise property buyer will study location dynamics and typology of the project visà -vis the existing demand for such properties before taking a final decision. "Strategic location, best price, value for money and infrastructure with facilities of high standards are the few things which helps the buyer in making the right decision. In today's scenario buyers are looking for best standards of living with customised services and facilities to have an easy luxurious living," says Sunil Bedi Chairman & MD of JMD Group.
Experts say the true nature of the market will only be revealed by mid-January 2009. "Interest rates will fluctuate according to the rapid-fire measures being implemented by the RBI. We will get a clearer picture by early next year," adds Mr Puri.
Developers say property market growth hinges on fall in home loan interest rates but banks, taking cue from global disasters, are playing it safe.
Heard the buzz around falling realty prices? And the fact that even interest rates are set to see a downward revision. Well, you may get tempted to start looking out for your dream home, but hold on. There's still a gap between the proverbial lip and the sip.
Most developers have indicated that it's difficult for them to squeeze margins further and more price cuts won't be feasible for them. DLF chairman K P Singh, for instance, recently evaded the question about price cuts. "A number of taxes have been imposed on the real estate sector. These need to be rolled back for a push in demand. Prices are a function of demand and supply and in the current scenario, supply is in excess of demand," said Mr Singh at an Assocham meet.
The situation is the same with other realty players, who are tight-lipped about any further revision in prices.
In such a situation, what options does a prospective buyer have? In fact, coming back to interest rates, what really is an ideal home loan rate in the present situation? Says Anuj Puri, chairman and country head of global real estate consultancy Jones Lang LaSalle Meghraj (JLLM), "The `ideal' home loan rate from the borrower's point of view is obviously the lowest. From the banking system's point of view, the most workable interest rate is one that is high enough to make lending reasonably profitable, yet low enough not to discourage potential borrowers. We will not see alltime lows like 7% again, but a workable rate of interest would be between 8.5-10%."
While PSU banks recently announced a rate cut of 50-75 basis points (bps), private banks are still to do the same. Says Renu Sud Karnad-Joint, MD of HDFC, "The current floating interest rate is 11.75% irrespective of the amount and term. The fixed rate is 14.25% . This is a pure fixed rate without any condition or right with the lender to increase the rate. Our interest rates are a function of our cost of funds. We have always passed on the benefit of lower cost of funds to our customers and we will continue to do the same."
Agrees an ICICI spokesperson, "The interest rate is 13% for floating loans and 16.5% for fixed. We continue to watch the market situation on a dynamic basis." But while private sector banks have not increased margin money on loans, some PSU banks like State Bank of India (SBI) have increased margin requirement by 5-25 percentage points.
The current interest regime and low demand has made developers offer value buys for the buyer. Many major developers such as Omaxe, Parsvnath and DLF have even shifted focus to affordable housing to boost demand. In fact, slack demand for housing and high interest rates have made developers offer value buys to counter the present situation. SVP Builders, for instance, is providing special time-linked plan for the buyers. TDI also has a scheme for a new project wherein customers can pay own their apartments by paying Rs 9 lakh as booking fee and the rest in EMI on possession after two years.
There are a host of other factors that play a crucial role in impacting a customers decision. A wise property buyer will study location dynamics and typology of the project visà -vis the existing demand for such properties before taking a final decision. "Strategic location, best price, value for money and infrastructure with facilities of high standards are the few things which helps the buyer in making the right decision. In today's scenario buyers are looking for best standards of living with customised services and facilities to have an easy luxurious living," says Sunil Bedi Chairman & MD of JMD Group.
Experts say the true nature of the market will only be revealed by mid-January 2009. "Interest rates will fluctuate according to the rapid-fire measures being implemented by the RBI. We will get a clearer picture by early next year," adds Mr Puri.