For DS Kulkarni (24) buying a flat in Mumbai has become a daunting task. The sky rocketing prices have compelled him to focus on Navi Mumbai.
“There is no other alternative,” said Kulkarni adding, “For Rs 14 lakh, I can maximum have a flat with a carpet area of less than 300 sq ft in Navi Mumbai. Houses are not cheap even in Thane.”
“Builders are increasing prices by Rs 100 per sq ft every week and it is unrealistic. But what can I do,” he said.
This sums up the plight of the salaried class house buyers, constituting about 80 per cent of all the buyers in the Mumbai region, and who pay back the cost with their future income.
But there is more trouble ahead.
Prices of flats in the Mumbai region are likely to go up by 10 to 15 per cent post-budget due to the shortage of land, say real estate developers. Unless the finance minister announces radical measures by unlocking land resources and provides tax sops, the prices will gallop.
Though the finance minister has asked the public sector banks not to increase the interest rates for the time being, it may not help much as the private sector banks, that control 75 per cent of the business, may charge more. “Unless interest rates are attractive, buyers will find it difficult to go for houses. Also, the land availability issue needs to be addressed if prices are to settle,” said Mukesh Patel, director, Neelkanth Group.
The finance minister must announce big changes in the budget to curtail prices, he said. Realty developers have asked the FM to make enough land available in every city so that prices will fall automatically. This can be done by repealing the Urban Land Ceiling Act and releasing the salt pan land for development.
The tax exemption limits on interest amount for housing loans must be enhanced to Rs 3 lakh so that the rising pay-out levels can be balanced. And finally, exempting stamp duty on resale flats. But the housing finance sector does not expect much. “It will be great if the existing sops can be retained. The FM would be more focused on addressing the problem of rising inflation and falling agricultural growth rather than the housing sector.
“We expect real estate and interest rates to stabilise with a higher side of 50 basis points,” said Aseem Drhu, Executive Vice President, Head of Business Banking and Mortgages, HDFC Bank.
He said this year house buyers will come under the double pressure of rising interest rates and real estate prices. But since people’s income is rising it will have margin effect on the housing finance industry that will still grow at 20 to 25 per cent as compared to 30 per cent now. “This year should see stabilisation of real estate prices,” he added.