Last year, the confidence level of home buyers took a severe beating amidst high property prices, rising home loan rates and large-scale delivery defaults. With low home sales and high unsold inventory, property buyers (both end-users and investors) took a back seat. The new year however holds hope as buyers are back with improved sentiment and higher confidence level, shedding their reluctance to invest in residential real estate.
These are the findings of a national level Survey, the “Realty Plus – 99acres.com Consumer Confidence Index” study, which presents a unique insight into the mind of home buyers. This first of its kind of online-survey that tried to differentiate between the buying behaviour of end-users and investors, confirmed the marked trend of investor/speculator-driven market giving way to end-user driven market. The survey reflects buoyancy in the overall confidence-level of the home buyers. End-users with renewed confidence are now showing strong intent to purchase homes. The survey findings have revealed that an overwhelming 75 percent of prospective home buyers have shown their definite intent to purchase a home in the near future. There is a marked increase in their confidence level, with 39 percent being bullish about home buying, and 46 percent displaying reasonable confidence.
Prospective home buyers, especially fence-sitters, are now shedding their apprehension to invest, as they realise that in view of uncontrollable inflation, home loan rates may not decline soon. They have also realised that with the new land acquisition policy in place and with increasing material and labour cost, property prices will only go up in the coming months. Close to one-fourth of the respondents are of the view that post elections, once the economy revives in the second half of 2014, prices will also rise. And as such, it is not wise to keep on waiting for property prices and home loan rates to soften. Rather, it is beneficial to invest now when prices are comparatively depressed or stable.
In view of the exceptionally large number of project delays and delivery defaults adversely impacting the confidence level and buying sentiment, those intending to buy homes are extremely cautious about builder’s track record and his financial strength. The survey established that in order to ensure safety of their investment, a majority (51 percent) of respondents opted for ‘ready-to-move’ and ‘nearing-completion’ property compared to under- construction and newly launched property.
The survey highlights that compared to end-users, more investors are playing the wait and watch game, thereby reflecting their low risk appetite. This is further reinforced by the survey finding that it is not HNIs but retail investors who are active, and that they are opting for affordable and mid-income properties. But then the overall optimism of investors is reflected in survey findings with 61 percent respondents saying that they are inclined towards investing in residential property in 6~12 months while 50 percent say it is the right time to invest as prices are likely to go up in future.
As an investment option, real estate continues to be the best bet even today. The survey establishes that 47 percent respondents rate real estate as the best investment asset class. Compared to this, only about 19 percent have reposed faith in equity, 17 percent in gold, and 14 percent in mutual funds. About one-fourth of investors think that since it is a volatile period, it is wise to play it safe by investing in deposits. Historical annual returns from real estate have been in the range of 15-20 percent. While one-fourth of the investors are bullish about 20 percent plus ROI, 43 percent expect the Return On Investment to be in the range of 15-20 percent. According to the survey findings, one third of the respondents settle for less than 12 percent ROI implying that retail investors dominate the current market while HNI investors and speculators have taken a back seat as they have been finding it difficult to exit the market and they do not see any positive change in the short-term.