The Hindu Business Line : The great home rush

The average age of people buying homes has come down in recent years from 40 years to around 30 years. Men continue to be the primary applicants; though more and more working women are helping to repay the loans.

About 10 years ago, Valmiki Nagar in Chennai was a quiet suburban neighbourhood near the sea, with mostly older couples in individual homes with gardens of hibiscus and bougainvillea. It was a long commute into the city, and the kind of place that you mentally indexed as "for retirement." Today, Valmiki Nagar has rows of stylish apartment buildings where droves of young professionals have made their home.

A low interest rate on home loans, increased availability of real estate — especially in the suburbs, multiple incomes and the continuing breakdown of the joint family system and a change in mindset have helped fuel the great home rush in recent years. This is particularly true of folks like Shuba Kuila, an advertising consultant who moved into a new apartment in Valmiki Nagar a year ago. Her 2,250-sq ft duplex apartment has three bedrooms and two terraces, with a garden and a lily pond.

After deliberating between an independent home and an apartment, Shuba settled for the latter because of the security it offered, the chance for her son to make friends and access to amenities such as a pool and a gym in the complex, she says. "We bought the idea of happy living — so even commuting isn't really a problem, because you know that at the end of it you are coming to this environment," says Shuba, who works out of home.

Shuba and her husband took a loan from Corporation Bank after shopping around for a bit — "because you think twice, thrice about buying a home," she says — and are currently negotiating for a lower interest rate. As for the location, "it's quiet, green and cosmopolitan," she says, and no longer filled with only retired people. "I am 37, and I am not the youngest here — younger people are making more money," she says.

Arguably, the single greatest incentive now is the interest rate, which is as low as 8.5 per cent; an added attraction is the tax incentive on borrowed capital. Also, the procedures are simpler, and the loan approval process is faster - loans are sanctioned in 24 hours, and sometimes, even before a property is identified, says S. Ramabadran, Executive Director, Sundaram Home Finance Ltd.

"When we started operation in January 2000, the interest rate was 13 per cent," he recalls. "So the actual cost of borrowing, coupled with the tax incentive, has increased affordability, and someone thinking of buying a Rs 8 lakh-home can go in for a Rs 10 lakh-home." Real estate prices have also bottomed out and corrected after the boom, and construction activity in the suburbs has eased supply, he adds. Conditions are so favourable that people are even buying second and third properties, or upgrading to bigger apartments, he says.

Sundaram offers loans of up to Rs 1 crore; the interest rate for the 5-year term is 8.75 per cent, with an EMI (equated monthly instalment) of Rs 2,129 (per lakh). The 20-year term has an interest rate of 9.75 per cent and an EMI of Rs 963 (per lakh). Often, because there is parity in interest rates, the value add-ons might swing the vote: in Sundaram's case, it could be the free personal accident cover or low-cost property insurance.

Currently, those applying for home loans typically have a monthly income of Rs 10,000-Rs 20,000 and the average loan size in Chennai is Rs 6 lakh for a two-bedroom apartment, according to Ramabadran. The average age of the homebuyer has skewed lower in recent years, down to 30-36 years from 40 years. And, while men are still the primary applicants, there is increasing interest from working women, as well, who anyway help repay the loan. "Young people are buying homes even before buying a car because of the attractive home loan options and the availability of properties," he adds.

That is certainly the case with J. Chandrasekhar, a Chennai-based accountant, who has been married for two years. After availing of a Rs 5-lakh loan from Corporation Bank last year, he booked an apartment on the Old Mahabalipuram Road, again not considered a desirable residential area just a few years ago. "A home is a bigger priority than a car, as interest rates are falling, and you can also get tax incentives," he says, adding that he plans to buy a car after he moves into his apartment later this year.

The scenario is not entirely different in the Capital, where high rents, combined with the attractive loan options and the tax rebate have encouraged more people to buy their homes rather early in life. Like their counterparts in Chennai, Delhiites are also looking for a good quality of life, and not just a place to come back to at night: this has made the condominium concept extremely popular.

Condos, in suburbs such as Gurgaon and Ghaziabad, come equipped with 24-hour power and water backup, a security system, a gym, swimming pool and so on, and are available at Rs 10-15 lakh.

"Apart from saving on rent, I have also managed a better quality of life," says Pradeep Jain, a young executive with an FMCG company, who recently bought a two-bedroom condo in Gurgaon. "By shelling out just Rs 12 lakh, I not only have the comfort of staying in my own home, but I am also able to enjoy the comforts the condominium offers."

Developers such as DLF Universal have also introduced an upgraded scheme, wherein you can buy a two-bedroom apartment first, and then go in for a bigger home as your income level rises. Also, given the high rate of mobility on the job, people no longer regard their homes as a lifetime purchase; rather, they want to invest in good, affordable property that they can sell easily when they move, says Col. Prithvi Nath, Vice-President — National Real Estate Development Corp.

In Mumbai, too, people are looking for amenities — the most important of them being parking space — easy-maintenance surfaces, and Internet and cable connections, says Sunil Bajaj, a real estate consultant. The average homebuyer is 25-35 years old, down from 40-plus years about a decade back, and it is not uncommon to come across even 23-year olds, he adds. The suburbs are preferred for affordability, and people do not mind going into new developments, as infrastructure has improved, he says.

"About 15 years ago, I used to see a lot of people moving to Pune and Bangalore when they wanted to buy a home, but today Mumbai has become more affordable even for young people," he says.

For many youngsters, some of the old reasons to buy a home still hold, like having a piece of property in one's name. For most, like Yogesh Prakash of Mahindra British Telecom, a home of one's own holds sentimental value and practical appeal. "It makes more sense to me to buy a flat and give the same amount to the bank each month instead of giving it as rent to the house owner," he says.

In the case of D.B. Jadhav of KSB Pumps, Pune, the incentive was that the loan processing and registration, which usually take up a big chunk of change, were free. While for Sandeep Joshi, who works at the Centre for Development of Advanced Computing, it is the government rebate on tax on interest payment. "It's a good bargain, especially when the home becomes yours within three years," he says. The rush to buy a home is even more evident in cities such as Bangalore and Hyderabad, where builders and banks alike pull out all stops to woo young IT professionals like Suresh Kamath and his wife Anita, who recently returned to Bangalore after a year's stay in the US.

The Kamaths — Suresh is a consultant for some IT companies and Anita works at one — had savings of about Rs 12 lakh, to which they added an HDFC loan of Rs 15 lakh, and bought a luxury apartment on Bannerghata Road.

"Investing in a house is different from investing in a car or any other big commitment as there's always the comforting factor that real estate prices hardly ever come down," Suresh says. "So in a bad financial situation, I can always sell my house and pay off my debts." And, apart from the investment opportunity that it presents, there is also the social pressure to buy a home of one's own, adds Anita.

The fact that the Kamaths have taken on such a big liability only four years after starting their careers is not surprising, says Sitaram Bhat, an officer with the State Bank of India (Personal Banking Division), Bangalore. In the last three to four years, about half of the home loan applicants have been in the age group of 25-35 years, he says. "Gone are the days when we used to wait for a person to stabilise in his career and then approach him with a housing loan scheme," Bhat says. "Today the younger the applicant is, the higher is his loan requirement."

To facilitate the home loan process, most banks and home finance companies also have tie-ups with large corporates for their employees. Typically, the company enters an agreement wherein the EMI is deducted from the salary every month.

Sundaram, which began its corporate alliances about six months ago, has tie-ups with about 15-20 companies, including the TVS Group companies, Ashok Leyland, Polaris, and Infosys, and has approved more than 1,000 loans, says Ramabadran.

Typically, the bank or home finance company interacts with employees regularly, answering questions and handing out literature. Sundaram also has a mobile office that visits industrial parks like Tidel Park in Chennai. "It would take longer for them to shop around and go to an office themselves," Ramabadran says. "It's so much easier and quicker this way." Because there are so many options, the information available is `phenomenal' he adds, and potential homebuyers - no matter how young — do their homework diligently.

Still, there is a caveat: young professionals sometimes throw caution to the winds in buying a home and are not always prepared for a change in fortunes.

Take the case of Rajesh Murthy and Bina, young IT professionals who bought a Rs 40-lakh luxury apartment in the upscale Indira Nagar in Bangalore.

Recently, Bina lost her job and they are now struggling to meet the Rs 35,000 EMI toward the loan, and are looking for buyers for their apartment. "What happens is that young people make huge commitments and don't know how to handle it," says Srinivas Murthy, Rajesh's father, who is bailing out his son.

Still, these are but minor hurdles, and for now there seems to be no let up in the great home rush.

With inputs from Anjali Prayag,

R. Savitha and Ajitha Shashidhar

Photo by Shaju John

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