Renu Sud Karnad, joint managing director of HDFC, the country's largest mortgage player, said she saw 'increased interest' from first-time house buyers, courtesy the correction in property prices, interest rate cuts and developers introducing affordable housing by resizing the offered areas.
Property developers agree.
Consider this:
Bankers also see a sharp rise in enquiries from first-time buyers, after an 18-month hiatus. Bank of India Executive Director M Narendra said many first-time buyers were coming to the bank for loans as the availability of affordable projects had increased.
Cuts in interest rates and property prices have improved affordability. First-time buyers have been a huge beneficiary of the former. Every 0.5 per cent increase in the interest rate reduces home loan eligibility by about 7 per cent, shows a study by Liases Foras, a real estate rating & research agency.
Liases said real estate would attain the 2005 efficiency if home loan rates came down to 7.5 per cent and property prices fall by 5 per cent. The risk spread in the real estate sector would then be negligible.
First-time home buyers have stayed away from the market ever since developers, in a bid to cash in on the market sentiment, focused on launching luxurious projects, bigger in size and priced beyond the reach of average buyers.
Property prices across India more than tripled from 2003-07, because of rising incomes, mortgage availability at inexpensive rates, higher tax benefits and speculators flocking to the market.
As a result, inventory levels of property jumped to 40 months of equivalent sales, compared with eight months or lower a few years ago, said Pankaj Kapoor, CEO of Liases Foras.
However, some analysts and experts said it might be difficult to sustain the momentum as several genuine buyers were expecting a further drop in prices and uncertainty in the job market might make matters worse.