Affordable housing is witness to degrowth at a time when luxury housing is on a roll. A perception has hence gained ground that the higher interest rates in the range of 8.5-9% is what is the bottleneck for the buyers. However, the fence sitting buyers across the country, more so in the affordable segment, don’t think so. They rather cite the empirical evidence when the housing market was on a roll even when the interest rates were in double digit.
The Indian home buyers who have consciously paused their home search have other priorities and it is definitely not the mortgage rate that is a prime deterrent. As many as 74% Indians categorically feel that the interest rates are their 4th concern in the housing market. 82% Indians are worried about the skyrocketing house price in the country that is definitely not in sync with their salary growth.
70% Indians feel that the job market is not that stable to make a long-standing commitment of buying a house. Rising food and other inflation that is way ahead of the overall inflation rate in the country deters as many as 68% Indians.
Only 26% of Indians are of the opinion that it is the high mortgage rate that concerns their dream of buying a house. Close to 8 out of 10, as many as 78%, have done their calculations, only to feel that the housing finance in today’s market won’t be available keeping in mind their debt to income ratio.
These are the findings of a pan-India survey by Track2Realty, the real estate thinktank group. Track2Realty conducted this survey in 20 key cities of Delhi, Noida-Greater Noida, Ghaziabad, Faridabad, Gurugram, Chandigarh, Mumbai, Pune, Lucknow, Indore, Jaipur, Ahmedabad, Vadodara, Kolkata, Bengaluru, Hyderabad, Chennai, Coimbatore and Kochi.
The survey tried to gauge the mood of the home buyers as to whether it is the mortgage rate that is keeping the affordable home buyers away from the housing market. Through a set of open-ended and close-ended questions, the study delved deeper into the personal finance aspect of the Indians; their overall debt to income; willingness to be a home owner; cost & benefit in home purchase; and future outlook.
Survey Highlights
Survey insight into 5 key areas — Personal Finance; Debt to Income; willingness to buy; Cost & benefit; and Future Outlook
Interest rates are 4th concern for 74% prospective home buyers
House price not in sync with wage growth hurts 82% Indians
70% Indians feel that the job market is not that stable to make a long-standing commitment of buying a house
Rising food and other inflation that is way ahead of the overall inflation rate in the country deters as many as 68% Indians
High interest rates a matter of concern for only 26% Indians
Debt to income keeps 78% fence sitters out of housing market
74% feel they are out of housing market for ever
70% can afford a house only if they dispose of parental/inherited property
Mortgage rates irrelevant for those Indians who could make 40% down payment
58% question rationale of house price index to be ahead of overall inflation data
Affordability concern maximum in Noida-Greater Noida (88%) and least in Mumbai (40%)
62% respondents demand different slabs for mortgage rates in different housing segment
70% Indians maintain there is no logic to impose GST on affordable housing
“Even if I take a loan of INR 50 lakh for a period of 20 years, the interest rate at a max of 1% higher (it normally is range bound in 50-100 basis points), would cost me an additional burden of some 2-3 thousand rupees. Is this such an amount that I won’t buy a house of my choice? The real issue is being skirted here. Issue is that even the most affordable house in periphery locations is not available in the given budget. It is just not affordable for a salaried middle class now,” says Randeep Mehta in Gurugram.
“I have not met any home loan applicant who would postpone a home buying decision due to a 50-100 basis points hike in interest rates. I mean some INR 500-1500 per month is not a big deal when someone can otherwise afford to buy a house. In my opinion, it is the cost of the house. In the post Covid era the housing price inflation has been way ahead of either the overall inflation or the wage growth; in fact both. Just look at the home loan borrowers in recent times and it is only double income families who are buying houses,” says Shalini Ahlawat, a banker in Noida.
It is definitely affordability of the house price and not the mortgage rate that is keeping the salaried middle class away from the housing market. It is hence no surprise that a vast majority of them, as many as 74%, are conscious of the fact that if not now, then they would be out of the housing market forever. Nearly equal number of respondents, 70% to be precise, categorically said they would only be able to buy a house if and when they dispose of their parental property back in the home town.
Nearly a quarter of the respondents, as many as 36%, who intend to make up to 40% down payment upfront from their personal savings, even termed the mortgage rates to be irrelevant.
Citing frustration with housing market and financial constraints, more than half the respondents, 58% to be precise, questioned the rationale of the house price index beating the overall inflation data. There is a general feeling that the high-end investors are driving the luxury housing market and the greed-driven economy is leading the developers to hold on to the inventory of housing stock.
Affordability concerns were highest in Noida-Greater Noida where 88% respondents said the affordable housing is no longer affordable by any stretch of imagination. The concerns with affordability were least in Mumbai where only 40% said they would defer their house buying decision due to affordability issues.
“Just look at the overall salary in places like Noida and Ghaziabad, and then collate it with the house price index where the growth has been like someone earning in Mumbai or Bengaluru and buying a house over here. I mean there has to be some method in the madness in the housing market. As far as inflation is concerned, it concerns more with my running the house than buying a house,” says Mira Rohtagi in Ghaziabad.
While it is understandable that the rising home prices have been tough on the buyers, whether they have any suggestions to make. 62% respondents said the mortgage rates should have different slabs for different categories of housing. Even more in number, as many as 70%, said there is no logic to impose GST on affordable housing.
Track2Realty is an independent media group managed by a consortium of journalists. Starting as the first e-newspaper in the Indian real estate sector in 2011, the group has today evolved as a think-tank on the sector with specialized research reports and rating & ranking. We are editorially independent and free from commercial bias and/or influenced by investors or shareholders. Our editorial team has no clash of interest in practicing high quality journalism that is free, frank & fearless.
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