‘Home for all’ still a distant dream
Real estage
By Vasu

IT has been the last straw. For a market already on crutches for the last three years, the political happenings at the Centre have further depleted the net worth of property across the country. Every time the government falls or is reshuffled, rentals go on a downslide, says K.K. Arora, a broker in Panchkula. Big money is in renting out the houses to multinationals and with every quake of instability, they reassess their decisions to expand. This is a hard fact that brokers in Delhi corroborate. As it is, sale-purchase deals have been at a near standstill for the last two years and people are no longer investing in property. The only agreements, which were keeping property dealers in business, were that of leasing. That too has slowed down now. The change does not affect the business given by foreign missions and embassies but the multinationals and elite Indians have put off taking decisions on houses for the moment, says Rakesh Kumar, a broker who deals in prime rentable property in South Delhi. The rentals have fallen by over 20 per cent even in prime areas and what is more worrying is the long average time span required for finding a tenant today. The market supply far outweighs the demand and it is not uncommon for houses to stand vacant for well over one year. Only houses with the best modern fittings, superbly fitted bathrooms and uninterrupted power and water supply make the grade, he says. Even houses in prime locations have problems in being rented out. Companies today are curtailing expenses, says Arvind Nayyar, who works for a multinational and with the uncertain atmosphere, perks including, house rent allowance, are the first to be cut down.

However, political instability cannot be blamed for all that is wrong with the real estate scene today, avers Sidhartha Yog of CV Richard Elliss. Political instability has become a part of life and there are several countries in the world where the economy is divorced from the political proceedings. Though India has not reached that stage as yet, we are heading towards an economy where business can divest itself from political muddles, says Yog. Over the last few months, as in the past year, the real estate market has been slow. However, the end user market is now picking up, though the investor market is dead and the chances of its revival are slim, he adds.

The post-Budget scenario even with the new housing finance norms in place, has not altered drastically since the changes affect a scant 1 per cent of the total population, says Yog. "Housing for all" still stays a dream or at best a slogan on paper. Most benefits are valid only for the segment that pays income tax, which forms a miniscule 1 per cent part of the total population. As far as the lending rates and mortgage laws are concerned, they too deal with the upper-middle class segment. For the middle class salaried employee, say one who earns Rs 10,000 paying Rs 6,000 as EMI for a housing loan of around Rs 5 lakh seems practically impossible, especially if he is also staying in a rented home. Thus the "home for all" idea is not likely to take shape in the near future. Besides the high cost of borrowed funds, both for end users and developers who borrow at rates as high as 24 per cent push up costs. Other factors like high cost of construction, high government duties, antiquated laws and delayed clearances also add to the high price of ownership in India, says Yog. Citing the case of the USA where, the average cost of a house cutting across all segments is approximately two to three years of the annual income, he says in India it can be as high as the annual income for 15 to 18 years. Thus owning a house is the most expensive purchase that an Indian makes in his lifetime.

One possible solution is allowing direct foreign investment in the building sector which will result in the local finance institutions competing against the very low interest terms offered by multinational companies, says Yog. However, Parsh, a financial analyst, disagrees, saying that those foreign investors will also take into account the expected devaluation of the rupee before offering softer loans. Better technological inputs and faster construction techniques may bring down costs, which may translate into cheaper housing for the end user. However, till a clear political equation emerges at the Centre, the issue of housing for all and the dwindling worth of real estate investments is not likely to be on any priority list.