Home ownership low in India; high property prices, loan rates major deterrents

Home ownership among the urban middle class in India seems to be low at present, with high interest rates and property prices, among others, acting as the major deterrents for people in buying homes.

More than half of the people do not wish to buy a house in the next six months, with high interest rates and lack of personal savings and unwillingness to borrow being the most important limiting factor, followed by high property rates and insufficient loan availability, shows a latest survey by India Mortgage Guarantee Corporation (IMGC), in association with Kantar IMRB.

Just 32% of the respondents at present live in self-purchased homes, while almost 38% still live with their parents and the rest 30% live in a rented house, the survey shows.

Almost half of the people are looking to buy affordable homes of less than 500 sq ft, according to survey, with metros and mini-metros being the preferred options for around half of the home buyers, against 31% planning to buy affordable homes in smaller towns.

Younger people in the age groups of 25-44 years prefer affordable houses more than the ones in the 45-55 age group.

“The housing sector in India is poised for a higher growth, especially in the affordable housing segment by the Housing for All by 2022 Mission and the Infrastructure status accorded by the Government of India, apart from various others measures,” Sriram Kalyanaraman, MD & CEO, National Housing Bank, while releasing the The IMGC Home Hunt 1.1 survey in Delhi today.

High level of tenancy is another factor delaying home ownership, according to the report.

Tenancy is significantly higher in small towns at 37%, against 29% in metros and 23% in mini metros. The level of tenancy is at 63% in the age group of 25-44 years.

High interest rate, lack of loan history and getting the desired loan amount were the top three challenges faced by home buyers in obtaining a home loan , according to the report.

“Moreover, a younger borrower finds lack of loan history and obtaining requisite loan amount a bigger challenge as compared to other borrowers,” it said.

Lower home loan rates, extended loan tenor and tax benefits are the most important financial factors that influence people to buy a house.

“The self-employed consumers show a comparatively higher intent to buy a house, resulting in a greater need for home loans possibly due to the fact that this group is underserved,” said Amitava Mehra, CEO, IMGC.

Buying a house as an investment option is the reason for almost half of people looking to buy a house and those who have recently made the purchase.

Long term security and pride of homeownership emerged as the most influencing factors for home buyers.

There is a clear preference towards self-constructed houses (56%) in small towns as compared to under-construction units in mini-metros (47%) and metros (37%).

The average home price for all the people planning to buy homes was around Rs 34 lakh. The ticket size is the highest in metros at Rs 37 lakh and the lowest in small towns at Rs 27 lakh.

“Keeping in mind that more proportion of respondents seek bigger houses (greater than 500 sq ft) in small towns, the outcome of average ticket size is a reflection of high real estate prices in metros,” said the report.

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