By Vinod Behl IANS | 10 months ago

The new year has held some hope for realtors as the sentiments and confidence levels of home buyers have turned positive, shedding their reluctance to invest in residential real estate. This is in sharp contrast to last year when their mood had taken a severe beating amid high property prices, rising interest rates and large defaults in delivery. With low sales and high inventory, both end-users and investors stayed away.

These are the findings of the national-level Consumer Confidence Index Survey, conducted jointly by Realty Plus magazine and leading realty portal 99acres.com that presents an insight into the minds of home buyers. This first of its kind of online survey sought to differentiate between the buying behaviour of end-users and that of investors.

It confirmed the marked trend of a market driven by investors and speculators giving way to one steered by end users. The survey reflects the buoyancy in the overall confidence level of home buyers. End users, with renewed confidence, are now showing a strong intent to purchase a home.

The survey findings have revealed that an overwhelming 75 percent of prospective home buyers have shown their definite intent to purchase a home in the near future. There is also a marked increase in their confidence levels, with 39 percent being bullish about home-buying and 46 percent displaying reasonable confidence.

Prospective home buyers, especially fence-sitters, are now shedding their apprehension to invest as they realise that in view of uncontrollable inflation, home loan rates may not decline soon. They have also realised that with a new land acquisition policy in place and with increasing material and labour cost, property prices will only go up in the coming months.

Close to a fourth of the respondents are of the view that prices will rise after elections, and once the economy revives in the second half of 2014. And as such, it is not wise to keep on waiting for property prices and interest rates to soften -- rather, it is beneficial to invest now when prices are comparatively depressed or stable.

In view of exceptionally large occasions of project delays and delivery defaults adversely impacting the confidence level and buying sentiment, those intending to buy homes were extremely cautious about builder's track record and his financial strength. The survey established that in order to ensure safety of their investment, a majority (51 percent) of the respondents opted for "ready-to-move" properties and those nearing completion compared to projects under under construction or newly launched.

The survey highlights that compared to end users, more investors are playing the "wait and watch" to reflect their low risk appetite. This is further reinforced by the survey finding that it is not high net worth individuals, but retail investors who are active and they are opting for affordable and mid-income properties.

But the overall optimism of investors is reflected in survey findings with 61 percent respondents saying that they are inclined towards investing in residential property in 6-12 months while 50 percent say it is the right time to invest as prices will go up in the future.

Real estate also continues to be the best bet for investment as the survey establishes that 47 percent of the respondents vouched for it as the best asset class, compared to just 19 percent votes for equity, 17 percent in gold and 14 percent for mutual funds. About a fourth of investors think it is wise to play safe by investing in deposits, as it is a volatile period.

Historically, annual returns from real estate have been in the range of 15-20 percent. While one-fourth of investors are bullish about a 20-percent-plus return on investment, 43 percent expect it in the range of 15-20 percent. According to the survey findings, a third of the respondents also settled for less than 12 percent return.

This implies that retail investors are now dominating the current market. High net worth individuals, investors and speculators have taken a back seat, as they have been finding it difficult to exit the market, and also do not see any positive change in this regard in the short term.

(09.02.2014 - Vinod Behl is editor of Realty Plus, a leading real estate monthly. The views expressed are personal. He can be reached at vbehl2008@gmail.com)

(Posted on 09-02-2014)

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