According to reports, the average age of Indians buying properties has come down. Earlier, about couple of decades ago, buying a home used to be part of the retirement plan. However, now, youngsters in their late twenties or early thirties aspire to have a roof over their head. And, experts in the real estate sector ascribe this to the disposable income and easy availability of home loans.

Trends

At a meet held recently in Bangalore, the panelists spoke on various issues pertaining to the housing sector. They touched upon property market trends, realty funds, housing finance scenario, tax planning for real estate investment, marketing real estate among non-resident Indians and web marketing. The participants included builders, representatives of financial institutions, real estate agents and developers of Bangalore. 

Some interesting details on why everyone aspires to invest in property emerged.

For many, a house is a basic necessity, while for a few; it is the best investment option. It was also highlighted that for non-resident Indians (NRIs), who are keen on buying property in India, it is not only a solution to fulfill their desire to return to India at some point of their life but also a sentimental reason.

Another interesting data was provided that is about the aspirations of property buyers. Around 30 per cent prefer apartments, 20 per cent luxury villas, 15 per cent look for plots, while five per cent prefer farm houses.

While 23 per cent ranked Chennai, Bangalore and Mumbai as the preferred destinations, about 15 per cent also look at Tier II cities. 

According to its findings typically most property buyers choose to first invest in a property in their own native and later prefer to look at destinations outside their hometown for investment and a better sense of social position.

The first generation property buyers who feel it is the best sector for investment would go for apartments or condominiums, which would predominantly explain the individual's status. While the second or third generation prefers to invest in villas or resorts for his personal interest or as a vacation spot.

About 30 per cent aspire for properties worth Rs. 50 to 80 lakhs, 20 per cent between Rs. 1.5 crore to 2 crore, 15 per cent between Rs.1 5 lakh to 20 lakh, while five per cent of NRIs are looking for properties between Rs. 2 crore to Rs. 4 crore. 

The meet also highlighted the huge demand for budget homes or apartments ranging between Rs. 15 lakhs to Rs. 20 lakhs. 

Demand for home loans

All the above factors have also fuelled the demand for home loans. Despite reports of inflation, rumours of real estate market slowing down, there is a huge surge in demand for home loans. According to reports, the enquiries for home loans have seen a huge growth. The rise in enquiries may not be astronomical but a number that would make banks and financial institutions extremely happy.  

An employee of a private bank, Ramakanth Bhat is in search of his dream home in one of the upcoming localities of Bangalore. "For me, clear title deeds are important because I don't want to get into any kind of hassles in future. Next is the location of the area. How far a bus stop is…how far a school is…how far my workplace is from my home, these factors are very crucial.

And, finally the price. I have a budget of about Rs. 75 lakhs," says Mr. Bhat. He has approached a bank for home loan and is confident of getting the approval soon.

Mr. Bhat has opted for fixed rate of interest on his loan. He wants to be sure the exact amount he needs to pay in the future or at least he intends to know the exact interest rate to pay for the outstanding loan at that time. Alternatively, home buyers can opt for floating rates of interests on their loans. The floating interest rate is not determined while availing the loan and the rate may vary depending on various factors.

There is also good news for home loan seekers. Recently, the Reserve Bank of India (RBI) has informed banks and financial institutions not to levy any penalty on pre-payment loans taken on floating rates of interest.

It means that if your cash flow is good and want to repay the entire amount of home loan then you will not be asked to pay any fore-closure charges.

It is a huge relief for home loan seekers though in the recent past many banks had voluntarily abolished pre-payment penalties on floating rate home loans. The RBI has directed the banks in this regard only to ensure uniformity across banking system.

The property buying has also evolved over the years. The cost was the only deciding factor earlier.

Now, cost coupled with so many other factors including the rate of interest on home loans, has become important. Many buyers make an in-depth study before taking a decision.

The awareness level has gone up. So, make the most of it of what is offered by real estate markets but take a prudent decision.

Sudhindra A B

(This article was published in the Business Line print edition dated August 20, 2012)
XThese are links to The Hindu Business Line suggested by Outbrain, which may or may not be relevant to the other content on this page. You can read Outbrain's privacy and cookie policy here.