Track2Realty did a dipstick study of consumer behavior, their likes & dislikes, buying pattern & preferences and overall understanding of the business of real estate. This survey is a comprehensive analysis of the consumers in the property market.
The worst part is that there is no hope of market revival as the homebuyers have already taken a conscious decision to stay away from the housing market for sometime. This is no good news for a business hoping against the market fundamentals for a turnaround.
Homebuyers across the country look set to keep a tight grip on temptations to buy home as they worry job security, low appreciation, and delivery uncertainties.
The low consumer confidence has been linked as much to peoples’ lack of confidence in their own ability to pay as with the employment uncertainties. Collectively, the buyers’ risk aversion in today’s economy as well as the developers’ unfair business practices have eclipsed real estate like never before.
Seven out of ten, 72% prospective homebuyers won’t commit for the life’s costliest purchase anytime soon. Nearly half of homebuyers, 48% are uncertain about the job survival; 27% think the ROI (Return on Investment) is not attractive; and 25% are fed up with the uncertain delivery timelines of the projects.
These are the findings of Track2Realty pan-India Consumer Confidence Survey. The survey was aimed at understanding whether the recent policy changes & legislations have helped to restore the homebuyers’ trust in the business. Are the buyers ready to commit in the housing market anytime soon and be catalyst to the revival of the fortunes of the sector?
The results of the survey are disappointing and the blame goes as much to the state of economy & job market uncertainties as to the unprofessional conduct of the builders in yet not learning the important lesson of consumers’ trust.
Track2Realty conducted this survey in 20 cities – Delhi, Gurgaon, Noida, Ghaziabad, Faridabad, Chandigarh, Bangalore, Hyderabad, Chennai, Coimbatore, Kochi, Mumbai, Pune, Ahmedabad, Jaipur, Kolkata, Bhubaneswar, Lucknow, Bhopal and Indore between October 10 and November 20.
A structured set of questions that was based on the homebuyers’ psychology & real estate understanding, buying behavior & pattern, likes & dislikes, outlook on economy & employment, and appreciation potential & future outlook was given to the respondents. They belonged to a mix of the luxury, mid-segment and affordable buyers.
The survey shows that there is a greater degree of pessimism in the housing market of India. The consumer confidence is lowest in Kolkata with a score of 12 out of hundred. Consumer confidence score has been 28 at national level and Bangalore surpassed the national average with a score of 34.
“With most of the cities having modest rental yields it is better to live in a rented apartment than commit for long term liability like housing. It increases your expenses, returns are far lesser than the interest that you pay, chances of getting duped by the builders are high, and over and above that if you lose your job in today’s uncertain economy then your liabilities will lessen your chances of survival,” says Mugdha Sharma, an IT professional in Gurgaon.
The survey also tried to figure out whether real estate is still the best investment instrument. A piece of property seems to be a distant loser in comparison with other competing products, with only two out of ten finding it the best place to park money.
More than half, as many as 54%, are interested in financial products like mutual funds and stocks for better ROI as well as the liquidity. Real estate figures at third level (only 20% finding it best investment) after 26% voting for gold and other similar products with more liquidity options.
Beyond low consumer sentiment, there is another reason why the homebuyers would not commit in the housing market anytime soon. A large majority of homebuyers, as many as 62%, fancies chances of property market correction, if not outright crash. There is a general feeling that the heat is on the developers now and with interest on debt rolling they won’t be able to hold on the inventory for long.
“It is like who will blink first in the property market now. I know not many developers are in a position to hold on the prices with the amount of inventory that they are sitting over. Hence, wait & watch is the best bet to get a better offer in year or two,” says Sumedha Shah, an architect, in Ahmedabad.
The survey demolishes the myth that the interest subsidy on part of the government to make ‘Housing for All’ a reality has many takers. A substantial number of homebuyers, as many as 76% feel that the interest subsidy with the PMAY (Pradhan Mantri Awas Yojana –Urban) is hardly making any tangible impact on their EMIs.
“If someone tell me that the PMAY will reduce your EMI burden of INR 90 lakh with a couple of thousand rupees, it would be a joke for me at the most. I think the government needs to think smart in being a facilitator and assist accordingly to lessen the financial burden. Present scheme is a sham in most of the urban centers,” says Bhaskar Das in Mumbai.
The buyer psychology, however, slightly varies between first time homebuyer and the second/repeat buyers. While only 18% second/repeat buyers have confidence with the real estate at this point of time, consumer confidence index stands 38% with the first time homebuyers.
“It is about financial prudence and definitely not emotional urge to have a house of one’s own. With double-digit returns, financial products make more sense to me. Over and above that I have the liquidity and I can monitor its performance on a weekly basis to stay put or exit. Real estate is by and large a locked-in investment today and in case of financial emergency it is often not easy to exit,” maintains Shivprakash Reddy, a bank employee, in Hyderabad.
Is low interest rate an investment magnet? 78% homebuyers won’t get tempted with the interest rate alone. Only 22% buyers endorse low interest rate as the catalyst to buy a new house.
“For me interest rate is the third parameter to evaluate whether I can buy a house or not. Job security comes first, followed by inflation. And if these two factors of economic cycle give me comfort then only lower interest rate is a catalytic factor in my decision making,” points out Saumit Mazumdar in Kolkata.
What would be the time span when the buyers feel real estate market will yet again be attractive to invest? A whopping majority, as many as 84% feel it will take at least another 36 months for the market to attract the buyers.
This raises a fundamental question as to whether the recent policy changes and legislations have failed to give any comfort to the buyers. Three fourth, 74% of homebuyers don’t think RERA has brought any meaningful impact for them; 14% feel it will take more time for the sector to settle with the new provisions; and the rest 12% are not sure about it.
“When I find the builders openly advertising the project with Super Built-up Area and not the Carpet Area then how would I trust that the RERA has fixed the accountability? It seems either the law has no teeth or the projects are too many for the regulator to streamline the system. In some cases RERA actions that we read in the media reports are result of buyers fighting it hard with the builder. I am not sure how many of the buyers have the resources and time to fight with the builders,” says Raman Prakash, a school teacher in Greater Noida West.
“I booked an apartment in 2013 where the promise was to complete the project in 2016 end. Now the builder has got RERA registration with a fresh deadline of completion in 2022. The RERA is blind to such anomalies. Do you feel I will ever have the courage to buy another apartment?” questions Sunidhi Sharma in Lucknow.
More than eight out of ten, 84% homebuyers categorically say that despite the slowdown and liquidity crunch in the real estate market, the developers are not learning lessons. 78% even feel they are just waiting for the tide to turn instead of making any conscious efforts to win back buyers.
Has the consumer connect improved, as claimed by the developers? 80% of the homebuyers don’t think so and maintain that it is still the sellers’ market and only consumer connect on part of the builders is their monologue with one-sided communication, as they don’t want it to be a consumer involved dialogue.
More than nine out of ten, 92% buyers demand accountability of government agencies to put an end to the nexus of builder and government agencies. There is a general feeling that the real estate market will not be cleaner unless there is a greater degree of shared accountability on part of all the stakeholders.
“For the honest developers the government agencies are a source of rampant corruption and they bribe for clearances. It adds to overall project cost and hits the homebuyers like us. And for those who are hand-in-glove with the officials, any violation is allowed. Unless the accountability of officials is fixed, the market won’t be trustworthy for the buyers,” believes Sanchita Dutta in Kolkata.
Consumer faith in financial institutions — including banks and other home finance institutions – has been low for years. But the latest survey shows that the level of trust has plunged too all time low.
A vast majority of homebuyers, as many as 80% allege that banks/lending institutions are willful party to builders in exploiting homebuyers. As many as 58% suggest if the due diligence of the banks & lending institutions is made full proof, the buyers’ confidence in the property market could be restored.
“If the bank has financed my home purchase it is understood that they have done the due diligence. But no! Their officials are hand-in-glove with the builders. When something goes wrong they will catch hold of the one who is weak and vulnerable. So, they start chasing us and not the builders. While we are always worried with our credit score, the builder is least bothered,” says Devesh Patil in Mumbai.
What would not be music to the ears of the Indian real estate is the fact that across the country the homebuyers have positive outlook with only the 7 national real estate brands. Even when the survey got into regional dipstick, the buyers could endorse altogether 17 brands that they have positive outlook about.
What is even worse news for the sector and calls for deep introspection is the fact that the consumer confidence is extremely low to the extent of an outright ‘No’ with 412 realty brands out of a list of 500 real estate companies.
The survey concludes that since 2007-08 the Indian real estate market has not been the same. The recent job market uncertainty and the developers’ failure to seize legislative opportunities to come clean & trustworthy has only worsened the consumer outlook with what was once the sunrise industry and the best investment instrument for the majority of Indians.
Homebuyers’ confidence low
72% don’t think it is right time to buy house
Reasons of apprehension vary where 48% have job uncertainties, 27% feel ROI not attractive and 25% blame uncertain delivery timelines
Confidence Index National Average is 28% with most bullish city being Bangalore with 34% and most bearish city Kolkata with 12%
54% Indians prefer investment with financial products, 26% with gold & metal and 20% with real estate
62% expect price correction, 20% feel prices have stabilised, and 18% expect to appreciate
Benefits with PMAY: 76% maintain no tangible benefits with the PMAY
78% feel low interest alone won’t tempt to buy property
74% feel no impact of RERA
84% say developers not learning lessons
Consumer connect has not improved for 80% buyers
92% Indians demand accountability of government agencies
80% buyers feel banks & lending institutions are willful party in exploiting
58% buyers demand fool proof institutional due diligence
Buyers’ positive outlook with only 7 national brands out of 100 and 17 brands altogether
Buyers’ negative outlook with 412 out of 500 brands