The calendar year 2017 had ushered with a glimmer of hope for home buyers and the stagnant residential market. Amid the aftershocks of demonetisation when a public sector bank lowered home loan rates, many felt that the move was to wash down the initial public angst following the note ban.
Three months on, the sentiments essay a warm sunny skyline after prolonged spells of gloom. Last week, the largest public sector bank in India reduced its home loan lending rates by 25 basis points for loans up to Rs 30 lakh to 8.35 per cent.
A week later one of the biggest housing finance majors followed suit. It will offer home loans up to the same amount at 8.35 per cent to women and 8.40 per cent to others. The domino effect didn’t stop there. Another major private bank tweaked its home loan rate structure in sync with the consumers at the bottom of the country’s housing pyramid.
The narrative heralds a new era for housing in the Indian real estate sector. It is a reflection of burgeoning buyers’ confidence in the wake of government reforms witnessed in the recent past.
The sops are directly linked to the Centre’s focus on affordable housing and rate cuts are meant to encourage the primary beneficiaries of the scheme – lower income home buyers.
Knight Frank India’s in-house data analysis shows that residential properties up to the Rs 35 lakh price bracket accounted for majority of the sales in at least four out of seven major Indian cities last year.
The trend stood true in metros as well as smaller cities. In Ahmedabad, for instance, properties up to Rs 35 lakh segment accounting for six out of ten properties sold last year. Likewise, in Pune the segment comprised 45 per cent of residential sales pie. Even in big metros such as the Mumbai Metropolitan Region (MMR) the share of this segment stood at 43 per cent.
Even for home buyers with a budget of up to Rs 75 lakh, the interest rates are reasonably low signaling a remarkable recovery on course for the overall residential sector in India.
Traditionally laced with layers of trust deficits, the Indian real estate sector badly needed a glass door. The creation of the Real Estate (Regulation and Development) Act, 2016 was the first step in drumming up confidence in home buyers. Now many states government’s and union territories have taken it strides ahead by making it a reality.
The collective efforts would have an obvious bearing on buyers’ confidence and whip up buoyancy back into the sector. The renewed sentiments are also resonated through the steady flow of new launches in the affordable housing sector.
Over and above the reform-driven Modi-regime, the economic parameters in general are also shining. India is projected to grow at stunning rate of 7.1 per cent. Crudes prices are under control and the consumer inflation has also tamed.
In mid-2015 government’s ‘Housing for All by 2022’ programme kick started amid concerns over the massive urban housing shortage of 18.78 million units in the country. After nearly two years of sailing in the rough sea, a glint of the horizon has begun showing. Twice earlier, in 2002 and 2009 we have seen the residential market gallop when home loan interest rates had dropped around the 8 per cent mark. Going forward if the economy continues to stay robust the creation of 20 million new urban homes and a house for every family might not be a distant dream any more.
About the Author:
Shishir Baijal is Chairman & Managing Director, Knight Frank India.