Track2Realty Investment Magnet Report 2015 tries to decode the alphabets of India’s housing market. The editorial team has not invented these alphabetic connotations and everyone in the sector is well aware of the alphabetic practices as well, yet we simplify it for the average investors and homebuyers who often forget the basics that make their fortunes vary. Familiarity with the given A to Z is often the difference between a skilled homebuyer and a novice.
A: Any investment in housing market is driven by ‘A’ for Aspiration; depending upon whether the Aspiration is to own a home, which is a reality in most of the cases, or the Aspiration is for its Appreciation Potential. But fundamentally in a housing market where the A for Affordability has gone for a toss and a rental house makes sense in many of the cities, it is the Aspiration for a home that drives the housing market.
B: It stands for Borrow but the homebuyers need to be careful on this count as Beg, Borrow or Steal mindset to purchase a house may land them up in a debt trap. Hence, Borrowing needs to be carefully evaluated as per the comfortable re-payment capability. Of course, ‘B’ for Bargain is something that makes the sound advice for the homebuyers in a market where the developers’ are reeling under financial stress and liquidity crunch with standing inventory of unsold houses.
C: ‘C’ primarily stands for Catchment Area for an average homebuyer who looks for a house in the area which is close to his work place and other necessary logistics. Of course, ‘C’ also stands for Connectivity which is one critical element that elevates the positioning of an area as the clichéd ‘location, location & location’. If only the given housing project has the ‘C’ for Competitive Advantage vis-à-vis other projects in the vicinity, it acts as a magnet for homebuyers. Of course, the homebuyers need to be Careful with their Credit Reliability & Credibility to get the loan.
D: In a market where many of the homebuyers have burnt their fingers, ‘D’ automatically stands for Developers’ Profile that has a symbiotic relation with the Delivery Timelines of the project. In a broader sense, this Developers’ Profile also equals to the Days in Market for the project, and the less number of Days the units of the project has been in the market the more are the chances of timely delivery. Now whether you make a Down Payment or go for a loan, make sure your finances don’t lead you to a Debt Trap. D nevertheless also stands for Design of the house.
E: This alphabet has both macro as well as micro connotation. While E stands for Economy of the region which primarily translates to job market in the vicinity at a macro level, it also stands for Execution Risk at a micro level. Collectively, these two Es make a housing project worth investing. Some of the developers are also realising, of late, their share of ‘E’ that stands for Economy of Scale and hence the focus is gradually shirting toward mass housing.
F: Probably no other letter has as much dual impact on both the developer as well as the homebuyer as the F since the Financial Management, or the lack of it, impacts both equally. The golden rule of housing investment is hence not to over-leverage; neither in buying the house nor in developing the project. Beyond the Finances of developers as well as the homebuyers, the Fiscal Policy of the government, which translates to inflation and interest rate, also plays its role in the housing market.
G: No other letter has scared the housing market, of late, as much as the letter G with Green Tribunal blocking many of the housing projects midway and thus hurting both the developers as well as the investment of homebuyers. The developers, on their part, are nevertheless trying to put up a brave face by promising Greenery all around their project. The National Green Tribunal does not seem to be convinced and often goes Green and hence the homebuyers’ due diligence is needed before investing. ‘G’ also stands for Government Policies that impacts the housing market.
H: The letter ‘H’ has more of an emotional appeal than rational one as most of the buyers treat the investment as Home and not House. The game is getting more and more High nowadays with skyscrapers in vogue. But wait! It is not that there is no rational logic behind this investment beyond a mere roof over the head. For the average salaried class it is the HRA Benefits that comes with the package of investment. Of course, Horse Trading is very much a reality in the housing market.
I: Yes! Housing is an Investment that takes care of housing Insecurities and is the best Insurance for most of the Indians. But the letter ‘I’ also stands for Investment Horizon. Most of the Indians calculate it in terms of the appreciation over a certain period of time. Needless to say, it is always expected that this should be the Best Investment in the portfolio. Normally ‘I’ is often referred in the housing market for Inflation and Interest Rate, but then this asset class is the best Insurance for most of the Indians.
J: Job Market has a direct co-relation with the local economy that fuels the demand for houses. The prospective homebuyers hence look for Job Market in the vicinity while the developers calculate in terms of commercial to residential ratio. There is no denying that the locations having commercial spaces and hence Job Market are the happy hunting ground for both the residential developers as well as the homebuyers. The developers nowadays have their sight on another ‘J’ Factor – Joint Venture with the land owners that make the investment less troublesome.
K: ‘K’ always stands for King but this Kingship in real estate market can also make you a pauper, if the calculations or risk go wrong. The investors are hence advised not to over-leverage themselves or over-invest in the property market. And for those who do so, the portfolio must be diversified with multi-location and multi-product, including commercial spaces to even out the risk. More importantly, the letter ‘K’ should better be with you in silent mode and help you with its connotation of Knowledge that is the best safeguard in the housing market.
L: The letter naturally sounds synonymous with Launch but the Project Launch per se is not enough to make it worth investing. Certain other ‘L’ including most importantly the overall Liveability Index makes the Launch a success. But before a homebuyer makes a purchase decision, there is another ‘L’ that is highly recommended – Legal Opinion. The absence of this might jeopardise the investment decision. Legal expert or the due diligence team must keep its eyes open on another ‘L’, that is Launch to Sales Ratio which clearly suggests the acceptability of the housing project in the market.
M: ‘M’ in any given business simply means Money but in real estate the relevance of this letter is beyond mere Money. This is because nearly all the developers go over-board with the ‘M’ that amounts to Market Buzz for the collective consciousness. But just arriving in the residential market with a project launch is not enough and the serious developers know it well that M2M (Mark 2 Market) of a residential apartment is a tough job. There is another ‘M’ that fuels the demand for houses –Marriage – as newly married couples are the prime demand drivers of housing market.
N: The world of the developers, especially in the Indian housing market, revolves around ‘N’ that is intrinsically linked to NOC (No Objection Certificate) and the homebuyers nowadays are aware to check the NOCs of the developers before making a purchase decision. Of course, there is another ‘N’ that scares the developers – Negligence – as in this age of consumer activism this can spoil his market reputation and future prospects. For the homebuyers though ‘N’ also stands for the Negotiation Skill since the marketing strategy of the developers nowadays rests on substantial discounts to be Negotiated.
O: By now everyone seems to have accepted that housing market is a good investment bet. It is, as a matter of fact, best asset class in the investment basket of most of the Indians. But there is a word of advice against ‘O’, that is Over-leveraged. Beware of Over-leveraging or Over-investment in this asset class. There is another ‘O’ that is most eagerly awaited by both the developers and the homebuyers. It is called Occupation Certificate. Of course, in the markets where there is huge demand and supply mismatch, and affordability is an issue, low Occupancy in a completed project also spoils the developers’ credentials.
P: The most desirable element for any location and the housing project in the vicinity is the Physical Infrastructure. It is this ‘P’ that is critical to another ‘P’, that is Price to Income Ratio of the Purchase. Of course, there is yet another ‘P’ called Pre-launch that is very tempting from appreciation standpoint but the investors should be wary of in a market where access to information is challenging and transparency is lacking. Potential of the market is nevertheless judged by the Physical Infrastructure, whereas it is the Pre-launch that often works as the lifeline of cash starved developers.
Q: The housing market has its genesis with ‘Q’ for Quest, the quest to have a house of one’s own. Everything else revolves around this quest but the homebuyers must also be conscious of another ‘Q’ that follows the Quest, that is overall Quality in general and Quality of Construction in particular. So, it is highly advisable for homebuyers to ask as many Questions as possible, ask it to the developers, to the local contacts, to the experts and whosoever can tell you a little bit about the project before you make a purchase decision.
R: The letter ‘R’ signifies many aspects in the housing market. In recent times, since the residential property is seen as the best asset class in the savings portfolio of an average Indian, ‘R’ stands for ROI (Return on Investment). A section of investors even evaluate this Return On Investment with another ROI of Rental Yield. Of course, ‘R’ for Rock Bottom Prices is always music to the ears of house seekers but one must be wary of the ‘R’ for Risk as well. It is hence ‘R’ for Ready to Move apartment that average homebuyer loves to see. It is your hard-earned ‘R’, that is Rupee, and hence you must be aware of both the ROI as well as Risks.
S: Despite of the location, physical infrastructure and the price point, what separates the potential housing location from a matured & established location is ‘S’ factor – Social Infrastructure. It is the Social Infrastructure like schools, colleges, medical facilities & entertainment options etc that make a location most sought after. Of course, for the developers the ‘S’ is critical from the standpoint of Sales Strategy at a time of liquidity crunch and Slow Sales. Of course, in their bid to Separate themselves from the crowd, the developers are increasingly experimenting with another ‘S’ called Smart Homes.
T: While ‘T’ stands for Technology if one speaks purely from construction standpoint, this letter has a huge influence over the psyche of both the homebuyers as well as the developers. The reason is Tax that most often tempts the fence sitting salaried class to jump into the property market to save the Tax. For developers also, there are various known and unknown swords of Taxation hanging over their head which affects the housing market. Of course, ‘T’ for Transparency is most desirable but missing link in this housing market, leading to Trust deficit on part of the homebuyers.
U: This letter is very much in demand due to its status of Under-construction. After having burnt their fingers in many of the pre-launches and new launches that could not hit the construction on the ground, Under-construction property is the most desirable element in the housing market today. Of course, ‘U’ also stands for Upgrading where people buy incremental property to Upgrade their lifestyle. But one set of ‘U’, that is Underwriters, must be avoided by the developers, since it spoils their reputation in the collective consciousness while leading the project to artificial appreciation, thus out of the reach of the end-users.
V: ‘V’ stands for something that in the housing market is not physical but Virtual. After all, what a homebuyer gets with an apartment is Virtual Land and not the physical land. Yet, it is this Virtual element called Vision that differentiates in the cost & benefit analysis between a good deal and a bad deal. Vision also stands equally true for both the developers as well as the homebuyers. The developers have burnt their fingers with this Vision, or rather lack of it, in their quest with the Pipeline Visibility of land bank. Homebuyers equally lack the Vision when it comes to differentiate between rational call and emotional temptation in the housing market.
W: It is the ‘W’ for Wow that makes a residential property worth its price. But wait nowadays there is another ‘W’ that is making the Wow Factor in the housing market – it is Women. Women are no longer just the influencers in the family to buy a house. They are rather taking the centre stage and in many cities it is the single Woman who is the critical demand driver of the housing market. But for men also the housing market demands more ‘W’ of Who, What, When, Where and Why to be addressed than their usual three ‘W’ of Women, Wine and Wealth.
X: Property market in general and the housing market in particular has always been driven be the ‘X’ Factor. It is the X Factor that separates a housing market and project from the other. More importantly, the quest for Xclusivity is always there to drive the homebuyers, especially in the upper end of property pyramid. In the bottom of housing pyramid it is the quest for Xtra that is high on the wish list of most of the homebuyers. Xpress construction and delivery of project is something that is yet another highly desirable ‘X’ element of housing market.
Y: Wikipedia describes ‘Y’ as an abstract strategy board game. In the context of Indian housing market one is not sure how far is the game abstract and to what extent is it real but whatever the strategy the market is getting Younger. Yes, you got it right! Homebuying is increasingly inching towards Gen ‘Y’ that is borne out of Young aspirations. There, of course, is a search option of ‘Y’, that is YouTube which is now a major source of information about the housing options in the market as well as the live construction update of housing projects.
Z: Zero-sum mentality is a term used in community psychology to describe a way of thinking that assumes all games are zero-sum; that for every winner there is a loser; for every gain there is a loss. It is not sure how far is this a reality in the housing market but everyone loves and hates ‘Z’ for its connect with Zero. While it is Zero Risk that brings smile on the faces of everyone in the housing market, a few extra Zero being added here and there makes one jittery. A house of one’s is nevertheless a Zazzy show off for most of the Indians.
