Mortgage rates not home buying deterrent: Track2Realty survey

Affordable housing is witnessing degrowth at a time when luxury housing is on a roll. A perception has gained ground that the higher interest rates in the range of 8.5-9% are the bottleneck for buyers. However, the fence-sitting buyers, especially in the affordable segment, do not think so. They rather cite the instance of the housing market being on a roll when the interest rates were in double digits.

To better understand the Indian consumer’s mindset, Track2Realty, the real estate think tank group, conducted a pan-India survey. The survey was conducted in 20 key cities of Delhi, Noida-Greater Noida, Ghaziabad, Faridabad, Gurgaon, Chandigarh, Mumbai, Pune, Lucknow, Indore, Jaipur, Ahmedabad, Vadodara, Kolkata, Bengaluru, Hyderabad, Chennai, Coimbatore and Kochi.

The survey tried to gauge whether the mortgage rate is keeping affordable home buyers away from the housing market. Through a set of open- and close-ended questions, the study delved deeper into the personal finance of Indians, their overall debt to income, willingness to be a homeowner, cost and benefit in home purchase and future outlook.

Indian home buyers who have consciously paused their home search have other priorities and the mortgage rate is not the prime deterrent. As many as 74% of Indians feel that interest rates are their fourth concern in the housing market. About 82% of Indians are worried about the skyrocketing house prices that are not in sync with their salary growth.

Nearly 70% of Indians feel that the job market is not stable enough to make a long-standing commitment to buying a house. Rising food and other costs that are way ahead of the overall inflation rate in the country deter nearly 68% of Indians.

Only 26% of Indians consider the high mortgage rate a concern. As many as 78%, that is, close to 8 out of 10 people, feel that the housing finance in today’s market would not be sufficient, keeping in mind the debt to income ratio.

“Even if I take a loan of Rs 50 lakh for 20 years, the interest rate at a max of 1% higher would cost me an additional burden of Rs 2000-3000. Is this an amount that will stop me from buying my dream house? The real issue is being skirted here, which is that even the most affordable house in periphery locations is not available in the given budget. It is just not affordable for a salaried middle-class person,” says Randeep Mehta in Gurgaon.

“I have not met any home loan applicant who would postpone a home buying decision due to a 50-100 basis points hike in interest rates. I mean Rs 500-1500 per month is not a big deal when someone can afford to buy a house. In my opinion, it is the cost of the house. In the post-Covid era, the housing price inflation is way ahead of the overall inflation and wage growth. Look at the home loan borrowers in recent times; only double-income families are buying houses,” says Shalini Ahlawat, a banker in Noida.

It is the affordability of the house price and not the mortgage rate that is keeping the salaried middle class away from the housing market. A vast majority of them, as many as 74%, are conscious of the fact that if not now, then they would never be in the housing market. Nearly equal number of respondents (70%) said that they would only be able to buy a house if they disposed of their parental property.

Nearly a quarter of the respondents, as many as 36%, who intend to make a 40% down payment from their savings, termed the mortgage rates irrelevant. Citing frustration with the housing market and financial constraints, more than half the respondents (58%) questioned the rationale of the house price index beating the overall inflation data. There is a general feeling that high-end investors are driving the luxury housing market and the greed-driven economy is leading developers to hold on to the inventory of housing stock.

Affordability concerns were highest in Noida-Greater Noida where 88% of respondents said the affordable housing is no longer affordable by any stretch of imagination. However, affordability concerns were lowest in Mumbai where only 40% deferred their house-buying decision due to affordability issues.

“Just look at the overall salary in places like Noida and Ghaziabad and collate it with the house price index where the growth has been equivalent to salaries in Mumbai or Bangalore. I mean there has to be some method in the madness in the housing market. As far as inflation is concerned, it is related more with my running a house than buying a house,” says Mira Rohtagi in Ghaziabad.

While it is understandable that the rising home prices have been tough on buyers, it is important to understand their demand. About 62% of respondents said that the mortgage rates should have different slabs for different housing categories. As many as 70% said that there was no logic in imposing GST on affordable housing.