People waiting for home prices to drop further, says HDFC MD Renu Sud Karnad : The Economic Times

NEW DELHI: 

It's a dichotomy that even bankers are unable to understand. Call centres at India's largest mortgage lender HDFC have been getting numerous calls enquiring about home loans and properties, but most are not taking the final plunge.

"Most people are still waiting for home prices to come down further. Also, this whole wait-and-watch on interest rates is difficult to understand," says Renu Sud Karnad, the managing director of HDFC, pointing out that many consumers feel that if interest comes down, property prices will also come down. 

"People feel that builders are all waiting and that when interest rates come down, they will also reduce prices," she says. Karnad, however, does not expect property prices to crash as land prices are not going to come down. "The intrinsic demand for homes has maybe deferred or delayed for it is there." 

In the last few months, she says, wherever builders have announced a project with .`70-80 lakh pricing or less for homes, they have been able to sell. Home sales across the country have dropped in the last two years. In the national capital region and in Mumbai, which are the biggest property markets of the country, they have been reduced to a trickle while in Bengaluru and other cities, too, sales have been hit in recent times. 

So, what is stopping builders from reducing prices to revive home sales?

"The whole thing of builders buying land and sitting on it and the debt that some of them have is stopping them from offering deals," she explains. 

The only reason why she is not as worried is because she feels the intrinsic demand for homes is there and is strong. Her insights come from the market presentations that HDFC makes to potential homebuyers. "People are coming and asking the right questions. I think it's just the psychological thing of whether it the right time to buy or by buying now the person will most probably miss the deal that he might get later," she says. It's a catch-22 situation for builders, she says. 

Today, everyone is looking for a deal and builders are nervous of announcing them because they feel that if they have already sold a few flats in a project and then reduce prices for the others that are left, the first batch will also come back and ask him to reduce the price. "They are also worried that if they announce a reduction, people would think that the builder is desperate," she says. 

In informal chats today, many builders are telling bankers that if a serious buyer who is ready to put down the money comes to them, they will offer him a deal. "So people have to understand that if they need a house, this is the time to buy," says Karnad. 

Karnad says that many delays in the last four to five years happened because approvals for projects didn't come on time. 

She also blames it on the regulation that does not allow institutions like HDFC and also banks to lend to builders for buying land. Many builders are currently stressed, she says, and this is because the flow of sales that some of them were expecting has slowed down.