Housing sales may get impacted if home loan interest rates breach the 9.5 percent mark, the CII Anarock Consumer Sentiment Survey – H1 2022 stated.
For as many as 93 percent of respondents, there will be a ‘High Impact’ on their home buying decision if home loan rates breach the 9.5 percent mark. The low home loan rate was one of the key factors driving housing sales across the country since the pandemic - reaching as low as 6.5 percent for a limited period. However, the three successive repo rate hikes by the RBI in 2022 (to curb inflation) has increased home loan rates, it said.
Presently, it is 8 percent upwards across most banks. The survey highlights that if rates hover less than 8.5 percent, there will be no impact (for 90% of respondents). Alternately, if rates breach the 9.5 percent mark, there will be a high impact on their decision. Additionally, if rates hover between 8.5 percent - 9 percent, there will be only a ‘moderate impact’ for at least 47 percent of respondents.
High inflation is a major cause of concern and has majorly impacted the disposable incomes of at least 61 percent of respondents. With inflation edging higher both globally and in India ever since the pandemic, there has been a direct impact on the disposable incomes of several people, the survey found.
The Russia and Ukraine war and surging oil prices in early 2022 further aggravated the problem. This was validated in this survey where as many as 61 percent of respondents felt that high inflation has had a major impact on their disposable incomes. For 34 percent of respondents, the impact was moderate. Merely 5 percent stated that the impact was insignificant.
The survey, conducted between January and June 2022, polled 5,500 participants responding via various digital platforms. The main aim of the survey is to provide all stakeholders – consumers, developers, investors, sellers, and owners including local and expatriates – deeper insights into the Indian property market purely from a consumer perspective.
The survey found that the residential market remains dominated by end-users, with 69 percent of respondents looking to buy homes for self-use and 31 percent for investment.
Demand for 3BHKs has outstripped that of 2BHKs for the first time. At least 44 percent of respondents preferred 3BHKs, followed by 38 percent favouring 2BHKs. In the survey's H1 2021 edition, 46 percent preferred 2BHKs, and 40 percent voted for 3BHKs. The demand share for 4BHKs has also risen – from 2 percent in the pre-Covid survey to 7 percent now, it said.
"The demand for homes priced more than Rs 1.5 crore continues to grow," says Anuj Puri, Chairman – CII Real Estate Knowledge Session on Tapping the Consumer Beat and Chairman - ANAROCK Group.
"Compared to the pre-Covid 2019 survey, there has been a 4 percent rise in the vote share for these homes – from 6 percent pre-Covid to 10 percent in H1 2022. Buoyed by the increasing demand for luxury homes, developers have also significantly increased the new supply in this category in H1 2022. ANAROCK data reveals that 33,210 units priced Rs 1.5 crore and above were launched across the top 7 cities in H1 2022. Contrastingly, H1 2019 saw just 16,110 units launched in this segment."
"The pandemic effect on home sizes continues - larger spaces in non-core urban areas remain in higher demand across the top cities. The reopening of offices and schools has changed little about this trend - as the increasing demand for the 3BHK configuration over 2BHKs vouchsafes,” he said.
Interestingly, investors with an 8–10-year investment horizon have the most positive outlook in H1 2022. More than half of respondent investors feel that the current housing market is a better investment proposition than it was 12 months ago.
The survey also highlights that while ready-to-move homes still draw top buyer demand, the demand gap between ready and under-construction options continues to narrow. The ready vs. new launch demand ratio is 30:25 in the H1 2022 survey, while it was 46:18 in the H1 2020 edition.
Preference for real estate over other asset classes is growing. In the H1 2022 survey, 59 percent of respondents prefer to invest in real estate, against 54 percent last year
Buying homes with capital gains from other investment asset classes like the stock market and mutual funds is the top priority for millennials and Generation X – with 56 percent and 38 percent respectively voting in its favour, it added.
Millennials are emerging to be key homebuyers, both directly and indirectly. In the previous survey, 53 percent of millennials preferred to buy a home later on from their capital gains while in the H1 2022 survey, this percentage has increased to 56 percent. The capital gains here refer to the gains earned from other asset classes such as stock markets, mutual funds, FDs etc. As expected, Generation Z prefers to ultimately go on a vacation or start a business from their capital gains. However, interestingly, even among this younger age group there is a growing interest in real estate investments.At least, 20 percent of Generation Z respondents are looking to ultimately buy real estate later on from their capital gains. Meanwhile, Baby Boomers primarily prefer to save for emergency funds and retirement. However, 15 percent of baby boomers are also looking to invest their capital gains into buying a home, later on, the survey found.