Introduction

The property market in India has seen a lot of action over the past decade. Decent economic growth, easy availability of finance coupled with high disposable income has made many young Indians look favorably at a real estate investment. What are the various considerations when a first time home buyer sets out to search for a property? Is there a change in the mindset of the home buyers? To understand this and many more questions related to the psyche of a first time home buyer, Makaan.com, the fastest growing real estate website in India, conducted a research christened First Home Survey that ran on the website between 23rd May to 13th June 2012 and witnessed a participation of more than 3953 first time home buyers from across the country including key cities of Mumbai, Delhi NCR, Bangalore, Chennai, Hyderabad, Pune,Kolkata, Ahmedabad, Chandigarh & more. Most of the survey takers were male, in the age group of 26 45 years.

The research brought forward two surprise findings, they are

1. First time home buyers prefer Down Payment plan (DP) over Construction Linked plan (CLP)
It is a popular belief among real estate players that Construction Linked plan (CLP) is preferred by home buyers as it provides protection against construction and other delays. Home buyers, however, seem to have a different take on the issue. They prefer a Down Payment (DP) plan as it comes with maximum discount. The research shows a whopping 41% home buyers preferred Down Payment plan. The urge for a discount is stronger than the security of a timely possession at least in case of a first time home buyer. In fact CLP is not even the second preference. Flexi Plan (FP) which is essentially a mix of Time Linked (TLP) & CLP is preferred by next 30% home buyers. This plan also offers greater discount compared with CLP. The pseudo favorite Construction Linked Plan (CLP) is favored by just 18% home buyers.

Makaan.coms take: We believe this to be an important insight into the buying psyche but limited to first time home buyers only. For people buying their second home or someone who has experienced a delay in possession, the preference will be for a CLP. Home buyers will realize their DP advantage only if their projects are handed over on time, a delay of 12-18 month will erode that advantage.

2. Connectivity is of greater importance than Location

This can be considered as a paradigm shift as far as home buyers psyche is concerned. Not so long ago, location was considered to be the most important consideration but as per the research findings 18% home buyers, now, feel Connectivity and Public Transport are more significant purchase considerations. This leaves Location to third position with only 8% preference. Price continues to be the top purchase consideration with 58% respondents opting for it.

Makaan.coms take: The preference for connectivity over location is not by choice. Home buyers are unable to find their dream adobe closer to their preferred location (in their limited budget) and are forced to compromise with an area 15-20 kms away from the main city. However, when it comes to choosing between available options, the one with better connectivity and public transport will win the race. This is evident from the fact that over the past decade areas that are connected through city metro or highways tend to appreciate more compared with other areas within the same city.

Other findings of the research are as under

I prefer a flat or apartment.

A first time home buyers start exploring for property options with a million dreams nurtured within. Their preferences give shape to their first home, whether they should go for a villa, apartment, studio apartment, or a builder floor. We asked what would be their preferred choice for a first home. 65% preferred Flats / Apartments, followed by Independent houses or Villas, which was favorite for 21% of the respondents. Independent / builder floor, Plot/Land and Service / Studio Apartment were other options in the list.

8% feel land or plot is ideal investment option for them to build their dream home as per their will. Only 5% and 1% opted for Independent/ Builder Floor and Service/Studio Apartment respectively as their investment options. Makaan.coms take: The preference for an apartment is typically an urban phenomenon and reflects the sentiments of home buyers living in tier 1 & 2 cities in India. This could be because of the security and community living benefits that only an apartment can offer. Outside of tier 1 & 2 cities, India is predominantly a low density environment where the preference will differ from the above.

I was 29-35 years, when I first thought of my dream home.

Buying a home is a big responsibility. We ventured to find out at what age does a first time home buyer takes this big step. 45% agreed that they thought of purchasing their first home when they were in the age group of 29-35. Another 25% thought of owning a home before the age of 28, this reflects the mindset of youthful population in India. 18% felt they decided between the age group of 36-42, and 12% admitted they thought of it when they were 42 and above. Makaan.coms take: The tendency among young generation to purchase a home at an early stage of life is going to increase in the coming years. With easy availability of finance and dual earning, the average age of a first time home buyers is likely to reduce from early 30s to late 20s in next 4-6 years.

I will buy a home for my family.

In Indian context wherein family values, tradition and virtues are respected, a home buyer in India typically buys a house for a family. First home buyers in India bought their homes for a family of 3-5 members. 42% survey takers said they got their home for a family of 4 members while 27% of the respondents bought their home for 5 members. Home buyers who got home for 3 family members are 20% of the total respondents and those who bought home for 2 members constituted 9% of the total respondents. Only 2% got the home for themselves.

My budget is under 40 lac.

Owning a house is a priority for most Indians today. Affordable housing i.e., housing under 40 lac continues to be a preference for 70% Indians. Around 42% of first time home buyers chose a budget between 20-40 lacs. Next is a budget less than 20 lacs with 38% of the respondents. For 15% budget is 40-75 lacs, whereas a budget of over 75lacs was preferred by decent 5% home buyers. Makaan.coms take: The research brings out the disparity in the demand supply equation in the Indian cities. Whereas most Indians are looking for a home less than 40 lac; the availability is this price bracket is limited, leaving demand far in excess of the supply. The supply in 75 lac plus is huge where-as there is limited demand in this segment, leading to unsold inventory. Real estate developers and policy makers will have to come to grip with this mismatch and take corrective action to solve this issue.

I can pay 10-20% Down payment.

Down payment is the first financial hurdle a buyer comes across in the home buying process. The research reveals that a first time home buyer can afford a down payment between 10-20% with 43% of the respondents opting for it. Next slab is that of less than 10% with 29% of the total respondents. Third is the scale of 20-30% with 14% respondents. Interestingly 8% respondents are willing to pay over 40% of the home value as down payment.

I prefer a Ready to Move in home.

43% of the first time home buyers are willing to go for ready to move in accommodations whereas 36% are willing to go for under construction accommodations. While most home buyers are going for new homes, there are takers for old homes as well, 14% are willing to go for homes that are up to 5 years old. Takers for buildings that are 5-10 year olds are 4% whereas only 3% of the respondents are willing to take a house that is more than 10 years old.

Makaan.coms take: Ready to move-in flats are ideal for first home buyers as this will save them from spending on rentals & pre-EMIs. The risk factor of delays and hassles during construction is also nullified. The only concern with Ready to move in accommodations is that they are pitched at higher prices in comparison to the construction and time plans. Higher price also makes the ready to movein flats less attractive from ROI point of view.

About MakaanIQ
MakaanIQ, is an initiative by real estate website Makaan.com, to provide information, intelligence and tools to help property seekers and real estate industry players take an informed property investment decision. MakaanIQ offers a host of services for the benefit of the home buyers including latest news on the Indian real estate sector and analysis of the property trends across major Indian cities. The website allows home buyers to search for property for buying, renting or PG. Home buyers can calculate their equated monthly installment (EMI) or check their affordability by using some simple tools. The website has been integrated with Makaan.com Property Index (MPI), a popular tool that offers up-to-date information related to the movement in residential property prices. For details check www.MakaanIQ.com.

Disclaimer
This research report is based on the data gathered from home buyers during their participation in an online survey on Makaan.com and is assumed to be accurate and complete. Makaan.com accepts no responsibility if the data is not found to be accurate or complete. Property seekers are advised to verify these findings before taking any decision. Makaan.com (People Interactive (I) Pvt. Ltd.), gives no warranty, express or implied, as to the accuracy, reliability and completeness of any information and does not accept any liability on the information which may or may not be subject to change from time to time due to market condition. For further information please contact, Natasha Gupta / Priya Chandrakanth, Corporate Communications Makaan.com 9811945822/ 9999234112