Boom For Homebuyers
This festive season is expected to be a big bang celebration, after a subdued one last year. The upcoming festive season could be a turning point for the residential sector. From Q3 2021 onwards, the sector has already seen a positive impact in housing sales led by pent-up demand from the last few quarters, and other factors. The vaccination drive is picking up across the country. About 96 crore individuals have received their first shot and 27 crore people have been fully vaccinated. This progress is also driving a positive sentiment that will increase the demand. Good vaccination speed increased the importance of home ownership, low cases, spent-up demand and gradual unlocking have been catalysts. But the demand is being driven by support aspects like lower home loan rates, stamp duty cuts and festive offers.
Low home loan rates
Over the last month, several financial institutions have reduced their home loan rate. This is led by several factors. Banks are wooing customers as home loans are considered a safe lending option for banks, with low non-performing assets. Most of the rate cuts are irrespective of the loan amounts. This will spur demand across the spectrum. Interestingly, some banks like State Bank of India have linked their home loan of 6.7 per cent to credit scores which will aid homebuyers with a good credit score.
For perspective, with Rs 20 lakh down payment on a unit priced at 1 crore, an individual seeking a loan of Rs 80 lakh would have got it at the rate of about 8.7 per cent interest before Covid. The total payable amount considering a period of 20 years would be about Rs 1.7 crore which would be reduced to 1.45 crore with the ongoing home loan rates of about 6.7 per cent interest. A buyer could be benefitted by around 14 per cent with the drop in interest rates in such cases.
Some states have reduced stamp duty rates to drive housing sales. In Q3, the Karnataka and West Bengal governments slashed stamp duty to boost housing sales. In July, the West Bengal government provided a stamp duty rebate of 2 per cent on the existing 7 per cent rate. In September 2021, the Karnataka government slashed stamp duty charges to 3 per cent on flats priced Rs 35-45 lakh. These initiatives will boost demand in the affordable housing segment. Last year, the Maharashtra government announced a stamp duty cut from August 2020 to March 2021, which provided a thrust to the sector and resulted in stellar housing sales during the period.
Schemes to boost demand
Developers are betting on several schemes to further drive sales. The variety of schemes during the festive season include no EMIs till possession, 10 per cent-90 per cent schemes, free gold coins, cars, furniture, assured return on investments and other cash discounts to woo homebuyers. Multiple favourable factors for a limited period will definitely nudge the fence-sitters as well to seize the opportunity. The impact of the festive season is observed in Tier-II cities as well since similar offers are provided by developers.
During the upcoming festive season, housing sales will see momentum, post the catastrophic second wave. Prospective homebuyers scouting for suitable options are likely to close deals led by the festive offers. Homebuyers are looking to buy larger homes, led by remote working, and developers are investing in bigger houses and open spaces in the peripheral areas. Moreover, homebuyers are also becoming more location-agnostic. This is leading to more enquiries in peripheral areas. This festive season would be an opportune time for developers to recover from the losses incurred due to the pandemic.
