Delhi edged out Mumbai as the favorite real estate location in India, with owner-occupiers as the main buyer segment in 2010. Home lending remains tight, while higher construction costs, taxes and interest are making ownership more expensive and slowing recovery for India’s real estate market. See the following article from Property Wire for more on this.
Delhi is the most popular place in India to buy a property with most buyers looking for a place to live rather than for investment, according to a new survey.
Some 34% of buyers are looking to buy a flat in Delhi, 28% are looking at Mumbai and 11% each opting for Bangalore and Hyderabad, the survey from the Confederation of Real Estate Developers Association of India (CREDAI) shows.
The survey also reveals that the realty sector in 2010 is going to be driven by end users.
Due to the recession and fluctuating property prices many put off buying last year but with an improving economy and slightly stable property prices, end users are ready to jump into the market this year.
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Most of the buyers who are interested in buying a house this year want it for their personal use with 67% of those surveyed citing this reason. Some 23% are looking for property as a long term investment while 10% are looking at it as a short term investment, it also shows.
The survey has also found that the cost of buying a property is marginally higher now due to the hike in prices of construction material, taxes and rising interest rates. Cement and steel prices are increasing and this is likely to be passed on directly by developers to the customers while a 10% service tax on purchase of apartments will make buying more costly, it says.
Recently, the State Bank of India, one of the leading players in the housing finance market, raised interest rates on home loans. Although the bank will continue with its 8% teaser rate for the first year, it has increased rates for subsequent years. ‘There is a strong possibility of price hike as factors like service tax and rise of input prices will be passed on to the end users,’ said Raj Menda of CREDAI.
The real estate sector had been hit by the recession due to falling demand and repayment pressures. However, the sector is now looking towards a recovery. ‘Roughly, as of now, real estate developers are saddled with 6% of unsold properties. In commercial property, there is an oversupply, which is expected to be absorbed in the next two years,’ Menda added.
Although the outlook is positive there is still a long way to recovery. Banks are still cautious about providing housing loan to consumers and asking for higher collaterals for lending to real estate developers. Several property deals are being canceled due to the additional costs being levied by developers, according to Yashwant Dalal, president of the Estate Agents Association of India.
He explained that many developers have decided to collect service tax, which adds up to nearly 4% of the price at the time it is handed over.
During the pre-global downturn property boom, many investors bought flats anticipating that the rates would go up further and just paid the builder the value of the flat, he said. ‘The agreement at that time did not mention anything about the service tax or the value added tax. Now, with property prices increasing past their pre-2008 peak, the developers insist on collecting the service tax and the 1% VAT when the investors try to sell these flats. They also have to pay the maintenance charges on the flat if it has not been paid yet. The buyer finds all these additional charges too costly to bear,’ Dalal added.
This article has been republished from Property Wire. You can also view this article at Property Wire, an international real estate news site.