As we usher in 2020, let us understand the situation. In an interview, Amit Kumar Agarwal, CEO, NoBroker.com explains the situation to Rajat Mishra. Edited excerpts.
As of now real estate in India is more of an end users’ market. If buying a property for investment purpose, one has to factor in a lot of considerations such as budget, city. It makes more sense to buy a house for end use now because there is a lot of unsold inventory and builders are offering a lot of benefits and discounts to offshore it. We have also seen greater demand for ready to move in properties.
Given the current state of Indian real estate, there is certainly room for institutional rental housing. The idea is to make unsold inventory attractive to investors and renting out unsold inventory helps accomplish that by showing rental yield to the investor. It is being done by many leading developers and we have also tied up with many builders for the same.
There are three reasons that have contributed toward this behavioural change in consumers. A lot of this inventory was constructed keeping the investor interest in mind. Although now real estate is emerging out of the crisis, but over the past few years, investors had pulled back which has been the first major reason for unsold inventory piling up.
Secondly, the feeling of euphoria is missing from real estate as we are still coming out from a down cycle.
And thirdly, as a result of the first two, the end users have more choice. They have more bargaining power with hardly any pressure for faster decision making.
For buy and sell, we have inventory for resale and ready to move in properties. Both of these do not involve construction risk. We connect consumers directly and help save transactional cost. Our major thrust is on the absurdity of brokerage. We make the property inventory available to a consumer for which they have been paying obscene amount of brokerage. We are therefore, trying to bring symmetry to the vastly unorganised market.
We also use a lot of technology to help the consumer in the entire home-search experience. Our rent prediction feature helps consumers figure out if they are paying the right rent and we do this at micro-locality level. We have a feature called “travel time search” which helps consumers measure distance in time rather than miles so they can save up on commuting time. Our endeavour is to be a one stop shop for all renting, buying, selling and settling down needs and therefore we have services such as home-cleaning, packers and movers, rent agreement and very recently home loans as well. So we want to partner with them and make the home-search and shifting experience as smooth as possible.
Crisis in real estate is not aggravating as of now. Real estate is in fact coming out of the crisis. Transactions have gone up and in 6 months’ time, we are positive that the situation would be a lot better.
I really appreciate the Draft Model Tenancy Bill. It would help greatly in making the system transparent for the owner as well as the tenant. Putting a body in place for addressing tenant grievances at local level is a laudable move as it would help in faster solving of cases. Also, capping the deposit which a very needed step especially in cities like Bangalore where humungous amount of money is charged as deposit is a very welcome step.
The Bill would definitely help streamline a lot of discrepancies in the rental sector adding ownership and accountability, which has hitherto been missing. It would also spell out a lot of grey areas.
Renting has been at an all time high due to the many changes introduced by government in the sector. Consumers can stall the decision for buying until they have more clarity but renting as a sector has always done well.
Plus, as mentioned earlier, renting does not pin them to a city, or an area and today’s consumer is more on the go. Renting suits his needs and lifestyle. Consumers in urban cities are more of cosmopolitans and buying a house does not figure as high up on the priority list as it used to some time ago.
Having said that however, due to increased disposable income the average age of home owners has reduced.
There are two major differences that stand out when comparing Indian real estate with global counterparts. In India data availability is poor compared to USA where decimal level data is available at the disposal of consumer to make decisions with clarity. Transactional level data availability in India is quite dismal. Also, data in India is not public and mostly controlled by government.
Secondly, and more interestingly, the interest rate and rental yield in global markets is at par. So, it always makes sense to buy. In India home loan is 8-9 per cent but rental yield is 1-2 per cent In foreign markets like USA, home loan is about 2 per cent and rental yield is 1.5 per cent. So rent vs buy debate has more appeal in India.