Affordability is the biggest factor affecting sales
What is the biggest question in the mind of the developers post demonetisation? Revival of sales takes priority in the present circumstances for the sector’s revival.
The first and foremost step that the industry needs to take is to make houses more affordable. Currently, the biggest factor affecting sales is the unaffordability of the homebuyers. House prices till 2012 have increased significantly faster than the income level of homebuyers.
During the last four years, the growth in residential prices in most of the top eight cities of India has been below retail inflation growth – a clear reflection of time correction. But still this is not enough to make housing affordable to a majority of homebuyers
Developers need to take a relook at the pricing, size and configuration of residential units and the gover nment should take a proactive initiative to develop peripheral locations with required connectivity and infrastructure, says a report by Knight Frank India titled India Real Estate.
Another factor that will help to stimulate the demand for house purchase is the reduction in home loan interest rates by banks. RBI has reduced its policy rate by 175 bps in the last two years and is likely to lower the policy rates by another 25-50 bps in the next three to six months. Given the liquidity situation, banks will have sufficient elbow room to lower the home loan interest rate in the coming months.
Developers need to take a relook at pricing and sizes of units to make housing more affordable.