Track2Realty pan-India Survey
- 88% Indians find real estate is still best asset class to invest
- 72% believe pre-launch or early stage of construction is best bargain
- 78% maintain upcoming locations give better returns than prime localities
- 84% homebuyers are sulking & repent their home buying decision
- 46% homebuyers have too serious issues with the developer to reconcile
No! These contradictory findings don’t suggest that this pan-India survey by Track2Realty has completely gone directionless. As a matter of fact, the first ever such exhaustive study on the homebuyers’ & seasoned investors’ psychograph suggest that the ‘greed is good’ prevails in the entire eco-system of the business and both the developers and the homebuyers are on the same page as far as temptation to make money with the house as a trading commodity is concerned. The investment decision of majority of the Indians is hence guided by single parameter of Return on Investment (ROI).
Needless to point out, this also suggests that the real estate is and will continue to remain as the best asset class to invest, even though the aspiration for the house is contradictory to the user experience. As a matter of fact, performance of the sector from user experience has further gone down, compared to our 2011 survey when nearly 80% were dissatisfied with the home purchase, as against 84% this year.
A whopping 88% Indians across ten cities of India believe real estate is the best asset class to investment, followed by stocks/mutual funds that 7% Indians find as number one choice and only 5% find gold as the first choice for investment. Had this finding not come with some riders, the news could have definitely send a positive signal to the Indian developers who are reeling under slow sales and liquidity crunch. What makes the case of real estate even more interesting is the fact that the Indians don’t find real estate investment is the riskiest one; they feel stock market is more risk prone. 65% find stocks to be the riskiest and only 28% find real estate most risky; while remaining 7% find other investment instruments to be riskiest.
These are the findings of India’s largest investment choice survey by Track2Realty to assess the aspiration and concerns of urban India about their investment choices. The survey has been conducted in 20 cities – Bangalore, Chennai, Hyderabad, Coimbatore, Kochi, Mumbai Nagpur, Nasik, Pune, Ahmedabad, Jaipur, Bhopal, Delhi, Noida, Ghaziabad, Gurgaon, Chandigarh, Kolkata, Lucknow and Patna – between September 10 and September 25. A structured set of questions that was based on the investment choice, investment horizon, return expectations, aspirations, real estate exposure, experience with the sector and satisfaction level was given to the respondents who belonged to mostly the mid-segment and premium homebuyers. The survey was to understand the quest for real estate, comparative analysis with other investment choices, overall value proposition, returns and future investment plans.
The Supreme Court of India might feel the pre-launches of the developers should be banned, yet majority of the Indians find it best option to make entry for big bucks. With a mindset of high risk & high gains, close to one-fouth of the investors feel pre-launches are best time for making sizeable returns. As many as 72% feel this is the best bet; something that suggests why pre-launches are so successful despite of many incidents where the investors of lost their money. 18% investors want ready to move in houses despite of its high cost to be safe than sorry; while 10% Indians would like to prefer under-construction properties as surity of delivery.
Though ‘location, location & location’ is the sales calling card of most of the developers across the country, those Indians who invest in houses for ROI have a different take. Nealy eight out of ten, a whopping 78% homebuyers feel it is the upcoming locations that are best places to invest since the prime locations are at the saturation point and cannot give the kind of returns that the upcoming locations can. 18% Indians would bet on established locations for fear of getting trapped if the infrastructure projects in these upcoming locations only remain on the paper. 4% investors are not sure about it.
Despite a stagnant real estate market in the last few years, majority of the Indians don’t feel it has been over-bought. More than six out of ten, as many as 62%, feel it has been under-bought in India due to affordability. Only 28% think it has been over-bought and the rest 10% maintain it depends on the family structure.
However, beyond this greed driven eocnomy of the housing market there is a stark reality that suggests return on investment may be tempting yet it is time for reality check. More than eight out of ten, as many as 84% homebuyers are sulking and have serious issues with the developers, ranging from delayed possession to poor construction quality and hidden cost of developer to carpet area/super area anomaly. Last, but not the least, facility management of the developer is a real pain point for the homebuyers.
Why do they endorse then to buy anything before ready to move in? Well, beyond the greed of making sizeable returns, today’s homebuyers have a few suggestions that they think could lead to better finance for the developers as well as giving chance of making money to the investors. 90% of the homebuyers feel it is not early entry to a project that makes it a dicey investment, rather the real issue is lack of regulation. 8% of the investors accept high risks in pre-launcehs anyway, while 2% are not sure about it.
What could be ideal mechanism to let early birds make money in the housing market? 55% say there should be an institutional mechanism on the lines of IPO; 36% recommend crowdfunding to be officially institutionalised; while the rest 9% would like to wait till an officially regulator comes into the picture.
In the absence of regulation, today no less than 46% homebuyers across the country have serious issues with the developer to an extent that reconciliation is not possible out of the court. This again is way higher than our previous study on the subject in 2011 when 31% homebuyers were locking horns with the developers in various courts.
The developers rely on their select set of investors and hence the study tried to figure out the loyalty index of investors with the developers. Nearly two third, 74% of the homebuyers would not like to invest with the same developer. This is 3% down than 2011 study when 77% homebuyers had said they would not like to deal with the same developer.
Despite of high investor activity in the speculative markets like Noida, the investors’ satisfaction is pretty low in the city. As a matter of fact, Noida happens to be the highly depressed market for homebuyers, followed by Ghaziabad, Nagpur, Gurgaon and Ahmedabad. Among the five picks for better consumer satisfaction, Bangalore tops the list, followed by Coimbatore, Chennai, Pune and Kolkata.
The choice of investors is nevertheless taking a shift. Though an apartment is still one of the best bet for the investors with 48% bullish on it, office space as a serious choice of investment is emerging to the extent that 34% Indians would like to invest in office spaces ahead. Rest 18% maintain that it depends on a number of factors and is a market-to-market reality.
Top ten cities where the Indians would like to invest in office space today is – Ahmedabad, Chennai, Hyderabad, Mumbai, Bangalore, Gurgaon, Pune, Coimbatore, Kolkata and Noida. In terms of housing investment, top ten cities are Bangalore, Chennai, Hyderabad, Pune, Coimbatore, Mumbai, Gurgaon, Kolkata, Nagpur and Ahmedabad.
Which are the cities that are home towns of investors across the geographical boundaries to fuel the real estate business? The study noted that despite the slow sales in India’s financial capital Mumbai tops the list of having investors pumping money into every city, followed by surprisingly Patna and then Ahmedabad, Gurgaon and Bangalore.
Do the investors fear any price correction or crash? Nearly all, a whopping 94% feel the home price will never come down, while remaining 6% maintain even though there is correction in the short term it will gain in the medium to long term. Why will the real estate prices not come down despite of slow sales? 54% feel the cartel of vested interests, including politicians, bureaucrats & black money operators, is so strong that they will not let the prices fall; 30% feel most of the developers have strong holding capacity in the event of slow sales; and the rest 16% believe it is due to demand and supply gap.
On a scale of 0-1000 while the aspiration to invest in a home is 872; but in terms of the satisfaction index this score falls to 224 out of a total of 1000. The study thus underlines one strong point – if only the developers focus on the customer satisfaction and the wide gap, rather chasm, between aspiration and satisfaction is bridged to some extent, they will do a world of good for their own fortunes, reputation and overall business cycle.
The survey demography belonged predominantly to the middle class and upper middle class of society, being educated professionals and a significant number of respondents were buyers of mid segment and premium homes. The buyers had a mix of first time and second time home buyers. Close to two third of the respondents, 62 per cent, were double-income families. Majority of the respondents were exposed to investment across the asset class and were conscious of the risks versus returns with these investment vehicles. In terms of the real estate portfolio, the respondents were carefully picked to have a mix of both the end users as well as the purely investors who had put in their money into the sector.
A large sample size of 10,000 respondents (500 samples in each city) was targeted. Out of these 8722 samples were finally zeroed down and considered for analysis. Rest 1278 respondents were not considered for evaluation since they either gave incomplete answers, contradicted their responses or were rejected for non-seriousness of their choices & concerns. The total sample size had 68 per cent males and 32 per cent females as a representative set.
The surveying method was one-on-one interviews, in which the researchers explained the theme and purpose of the survey and then handed over the questionnaire to the respondents to be filled and returned the next day. All the researchers being the local residents of the city, they managed to assure the respondents complete anonymity.
The results were based on a set of 21 questions and the answers were grouped into seven key factors of broader investment choice in the market, the investment horizon in terms of entry & exit, expectations of returns versus risks involved, aspiration level, their on-ground exposure to the real estate market, experience with the developer and the project and overall satisfaction level with their investment in general and real estate investment in particular.