I believe 2009 will see the customers who have deferred their home purchases in 2008 take the decision and purchase their homes given the affordability impact as well as the tremendous need for homes in the country.We have already seen a change in the customer sentiment towards purchasing a home and expect that the currently visible trickle of change in customer sentiment towards purchasing a home will translate into a normal buying cycle.
The reality is that customers are astute and have started to realise that while buying at the absolute bottom is a near impossible task, the downside risk from current levels is fairly low. Further, the purchasing power has improved substantially with the current market scenario.
The drop in interest rates from 11.5% to 9.25% combined with a reduction of 15% in real estate rates has resulted in an increase in purchasing power of 33%. The same EMI would, at a lower interest rate provide for a higher loan. The higher loan used to purchase a home at a lower price would enable the customer to purchase more square feet.
The transition of the real estate market will however lead to some fundamental differences this time. Customers will purchase based on need rather than based on the euphoria and hype we saw in 2006-2007. Already, sizes of homes have reduced and customers will be more circumspect in their purchase decisions.
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