Buyers realise homes still out of reach

aago. Yeh hi hai right time! screams a property exhibition advertisement in newspapers. But Shravan Desai and GV Rao are not buying it.

Property prices across the country are 10-25% lower than their peak in early 2008. Bank rates are about 4 percentage points lower. Still, the vast majority of the exploding middle class, which aspires to own a home, is not taking the plunge. Homes are still not affordable. Those described as 'affordable homes' are hardly homes.

"The rates may have come down, but even today, the prices quoted by sellers are too high," said Shravan Desai, an employee at an MNC in Mumbai. "The developers have reduced the price, but have started charging more for the parking space, which one has to compulsorily buy and that too pay black money for that," fumes Mr Desai, who has been hunting for a home for the past two years.

Many builders who might have collapsed last year but for the Reserve Bank of India's intervention, are raising prices on the back of the feel-good factor following the record rally in stocks, waning fear of job losses and the return of bonuses, though isolated.

DLF, the country's largest builder, has raised the price at its Capital Greens project by 25% to Rs 5,677 per sq ft. In Madhapur, Hyderabad, a 2,000 sq ft flat, which cost Rs 30 lakh in 2008, has doubled to Rs 60 lakh. A not-so-comforting rise for millions of aspirants.

"Properties and loans are still expensive for us," says Mrinalini, an employee at a technology company in the Capital.

Some builders also think that price hikes could destroy demand. "It is not very wise to increase prices drastically now," said Niranjan Hiranandani, managing director, Hiranandani Group, recently. "The market has just recovered and the buyers are returning."

For all the hype about the revival of the real estate market, the government's treasury is giving a different picture.

For instance, in North Chennai, between January and August, property registrations dropped to 19,834 from 39,331, compared to the same period last year, and so is the case with many regions.

"We have delayed our purchase in anticipation of a further fall in prices," said GV Rao, an ex-employee of Andhra Bank, in Hyderabad.

The lack of trust on the builders' ability to deliver homes on time and the fear that low interest rates could be a trap are keeping many buyers away.

Thousands of aspirants remain trapped with money sunk, as developers could not complete projects on time and in some cases where construction has been suspended, buyers do not know whether they would ever get their dream homes, or whether it will remain a dream.

"I couldn't sleep for days," says Dinesh Verma, a Delhi-based chartered accountant who booked a Rs 50-lakh house at DLF's New Town Heights project in Gurgaon. "After having taken 42% of the payment, DLF came back to tell us that it didn't have necessary licences to start construction." DLF assured Mr Verma and a thousand others that they would get their money back without interest within six months. Mr Verma is yet to receive his money.