Un'real' estate? Buying houses still a distant dream for many

Reema Sharma

The burgeoning price of real estate continues to keep Indian realty far from reality for many. Housing loans might have made buying a house easier but the difference between household incomes and rising property prices is widening with each passing day. Therefore, if a middle-class salaried person wants to book a house on loan, saving for the initial down-payment becomes a decisive factor.

For instance, in the last three years, prices in Delhi NCR have almost doubled, however, industry-wide increase in salary has, on an average, gone up by only 15 percent.

With a stable government at the Centre, business sentiments have also become buoyant and it is expected that housing prices will further flare up, thereby adding further pressure on the buyer.

Perhaps Indians will also soon take a leaf out of the Housing Movement in Taiwan where more than 15,000 people staged a sleep-out in front of a luxury apartment complex— The Palace—in Taipei City. The people laid down in front of the luxury apartment complex in protest against exorbitant housing prices.

Speculation in the real estate is also a major reason for the sky-rocketing prices. Echoing a similar tone on housing price speculations, Dr Naresh Bharde, Chairman & Managing Director Excellence Shelters Pvt. Ltd. says," The Indian real estate market has witnessed a lot of changes post the fourth quarter of FY14. It has been observed that a lot of positive changes have seeped into the real estate sector."

This speculation has come about as a result of observations around the globe. There is a focused approach on infrastructure development and affordable housing for the masses. Across countries, it is a commonly held view that real estate cycles are the product of speculation, Bharde adds.

"That is, when speculation drives up demand, prices skyrocket and subsequently vice versa. However, it is characteristic of real estate prices to fluctuate on a cyclical basis. In reality, housing prices depend not just on speculative demand, but also on supply and the fluctuating interest rates," according to Dr Bharde.

In India, investing in property is hands down, the safest bet. There are always options of going for a barren land or a residential property, depending on one’s risk-taking appetite, holding period and investment size.

In such a situation, what can the home buyer do to tackle the difference between income versus realty price rise? Speaking on this particular issue, he said, "One option, which is also gaining traction lately, is to buy agricultural or vacant land. Vacant land gives you the convenience of making an investment without doing anything," Dr Bharde said.

The costs are much lower than residential land and this provides a large upside potential if it is re-classified as suitable for housing layouts. But at the same time there are certain limitations for procuring agricultural lands for NRIs.

However, a better and safer option is, to go for a plot in a gated or a residential community. The price can be higher by 30-40 percent, but it comes with a few benefits. "For one, though you need to perform legal checks, the land title is likely to be clean and encroachment is also less likely since the layout is fenced. It's inclusive of infrastructure such as water and power already set up," added Bharde.

The presence of these necessary features makes it easier to sell the plot at a later time, bringing high returns to the owner. For investors in real estate, there are various means to churn profit in the long term, however for house owners the only solution lies in housing reforms. As for now, the house buyers can wait for consensus on the Real Estate Bill scheduled to be introduced in the next session of Parliament.