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Delhi top destination for end users looking to purchase flats

The Economic Times
 

Delhi is the most popular place to buy a property, according to a survey. The report reveals that 34% of those surveyed want to purchase a flat in Delhi, followed by 28% plugging for Mumbai and 11% each opting for Bangalore and Hyderabad. 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, property seekers shied away from making a property purchase last year - but with an improving economy and slightly stable property prices, end users are ready to jump into the market this year. 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 through the prism of a short-term investment.

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, according to the Confederation of Real Estate Developers Association of India (CREDAI).

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," Raj Menda of CREDAI said.

The real estate sector had been hit by the recession due to falling demand and repayment pressures. However, the sector is now looking up with some tangible signs of economic revival. "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.

Banks are still cautious about providing housing loan to consumers and asking for higher collaterals for lending to real estate developers. But several property deals are being cancelled 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 of handing 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 explained. "The agreement at that time did not mention anything about the service tax or the value added tax.

Source: The Economic Times