Demand for larger homes picking up: JLLM

October 15, 2009

Two and three bedroom homes, which commanded high popularity among home buyers from Pune in pre-meltdown times, have made a comeback. The last three months have demonstrated that the aspirational buyer is returning to the residential market again to check out developers' sites in search of good deals, a report by real estate research and advisory firm Jones Lang LaSalle Meghraj (JLLM) said on Wednesday.

In the twists and turns realtors took during the recession, a major shift was seen from the large size homes in the 1200-1600 sq ft area bracket to one bedroom and studio units in the "affordable" category. The general buyer preference has once again evolved to 2-3 BHK flats, the most popular price tags falling within the range of Rs 25 to 35 lakh, the report said.

According to the report, projects that were put on indefinite hold during the financial crunch are now seeing the light of day, with construction once again on a war footing across the city. Projects that are due to be launched within the next six months are being advertised heavily. For projects to be launched within the festive season, developers are not offering freebies and esoteric incentives, but are focusing on price discounts for limited periods, the report added.

"The slowdown has brought about residential space affordability and availability in areas that were previously out of reach for middle-income buyers. Due to reduction in pricing, residential property buyers now have a choice of attractive deals in preferred areas," said Mohammed Aslam, head of Pune market for JLLM.

Apart from a resurgence in positive sentiments, this renewed demand can also be attributed to the fact that housing finance institutions have brought down home loan interest rates to 8-8.5 per cent on fixed interest loans for three years, which stands in marked contrast to the 10-11 per cent that prevailed just six months ago, the report said.

Lalit Kumar Jain, vice-president of Confederation of Real Estate Associations of India (Credai) said the pent-up demand for homes has begun coming back to the market as there is an improvement in the buyer sentiment in the wake of better economic indices. "The feeling of uncertainty in buyers' minds is reducing and stability is returning. We see demand picking up for property in the Rs 30 lakh -Rs 1 crore price bracket. On either side of this bracket there were always buyers," Jain elaborated.

Vice-president of Credai Pune, Rohit Gera, said there are other factors responsible for the renewed interest in property buying, apart from conversion of pent-up demand. "The increased feeling of job/income stability and the realisation that the prices have finally bottomed out are driving the buyers," Gera observed.

Aslam said on the downside however, there are first stirrings of price escalations. "Based on the fact that the demand revival is still in its infancy, this represents a worrisome scenario which seems to indicate that the slowdown did not deliver a sufficiently convincing message," Aslam noted, indicating that owing to the price-conscious buyer profile that generally defines Pune, demand for residential spaces will only continue to grow as long as rates remain rational.

Gera said the supply in 2-3 bedroom space will be limited as the developers who were simply not there in the below 1,300 sq ft units game had held back their schemes. Projects in this category which are on hold will roll and more will be planned leading to price stabilisation, Gera explained.