Economy

Time for builders to chant affordability mantra

Anjana Chandramouly Bangalore | Updated on March 12, 2018

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With rising interest rates and property prices holding firm, home-buyers are now forced to downscale their aspirations because of the continuous tightening of purse strings.

Interestingly, in Bangalore, it's not by changing the location of their homes, but by reducing the size of the dream.

Price-sensitive market

Bangalore is price-sensitive with location being key to home-buying. “In the price-sensitive Bangalore market, what matters is the location and ticket size. If products are made affordable for the targeted segment, then sales would be good,” Mr Venkat K. Narayana, CFO, Prestige Group, told Business Line.

In order to make houses affordable, developers need to “right-size the units,” he said. Despite unit sizes seeing slight moderation, the average realisation is still good, he added.

In fact, companies such as Prestige Group and Sobha Developers are seeing good sales in the second quarter of this fiscal.

A home-buyer who earlier could have afforded a Rs 50-lakh home is now going in for a Rs 40-lakh property because his loan eligibility has come down drastically, point out industry experts.

For instance, a home-buyer with a monthly salary of Rs 50,000 would have been eligible for Rs 36-lakh loan at 7.75 per cent interest rate. But now his/her loan eligibility at 10.75 per cent has come down to around Rs 27 lakh.

Loan eligibility

Mr Naresh Dandapat, a real estate consultant, said that with loan eligibility coming down, home-buyers are forced to shell out more for a property of their choice.

“Hence they are forced to compromise on quality, location and also developer per se,” he added. However, with developers not reducing the prices, there is a slight demand-supply mismatch, he pointed out.

Although the demand for home loans has become “slower and sluggish,” it was only “a pause and not a stop” in home-buying, pointed out Ms Archna S. Bhargava, Executive Director, Canara Bank.

One price segment, which is doing very well, is the affordable segment, which is recession-proof.

But the only deterrent for enthusiastic developers, as Mr S.N. Nagendra, Senior General Manager – Karnataka and Goa, HCFC Ltd, explained, was the high land prices.

Published on September 23, 2011

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