Kochi: As real estate sector in Kerala shows signs of recovery, lockdown related travel curbs in the wake of COVID-19 are hampering efforts of potential apartment buyers from exploiting one of the lowest home loan interest rates in the recent times.
Cut in the home loan rates of banks should have spurred more transactions in the realty sector in the state, which has been gradually gaining strength in the last few months.
On the contrary, the expected rush for home loans has not happened.
“The home loan rates now start from as low as 6.75 per cent. Earlier it used to start from 8.5 per cent. But we haven’t seen an increase in the number of customers,’’ says Sreenath Induchoodan, secretary of Kerala chapter of All India Bank Officers Association.
He thinks job losses and salary cuts could be some of the key reasons for this scenario.
The real estate sector in Kerala has been battling crisis after another since demonetisation four years ago.
The floods in the last two years and demolition of flats at Maradu have all caused an adverse impact on the sector. The coronavirus pandemic dampened the prospects further.
Builders say there have been lot of enquiries, especially from the NRIs, since the total lockdown was lifted. But not many are able to conclude deals.
Though digitalisation has prospered among the builders with many of them providing 3D augmented real experience of visiting of the site, the buyers ultimately have to be physically present to execute the contract.
“Many from abroad find it difficult to travel for signing the agreement and bank documentation,’’ says M V Antony, CMD of Kunnel Projects (Pvt.) Ltd.
According to him a large percentage of buyer enquiries are made by NRIs from Kerala who are spread over 65 countries. “May be because of the job uncertainty abroad they are planning to get settled in Kerala. So, they look to buy a good property with the savings in their hands,’’ he points out.
Lack of adequate medical treatment facilities for Covid-19 for senior citizens in many countries could also be a worrying factor. “Perhaps keeping that in mind, many buyers now prefer to settle in towns in Kerala. A person from Balaramapuram likes to settle down in Thiruvananthapuram or a native of Muvattupuzha prefers to buy an apartment in Ernakulam,’’ says V Sunil Kumar, MD of Asset Homes.
Another change brought about by the pandemic is a liking for branded properties. “The buyers are giving more importance to safety and security and don’t want to be duped,’’ observes Sunil Kumar. He reckons that many may turn their attention away from gold as the prices have already peaked. They start to view real estate as an investment now with good chances of appreciation in future.
Home buying budgets across various segments have shrunk, courtesy economic problems induced by the pandemic.
Buyers settle for an apartment at a price about 20-25 per cent less than what their original budget, builders say.
However, the downturn has not affected home loan payments. The banks have not seen default on EMIs on the home loans because of moratorium declared by RBI. They are expecting the moratorium, that ended on August 31, to be extended further.
Since the buyers are opting for completed projects, the builders have been able to clear to a large extent the stock of unsold apartments, according Dr Najeeb Zackeria, MD of Abad Builders. “The decision making is faster now with clear interest on ready-to-occupy flats,’’ he says.
He finds good interest from local buyers too.
Virtually no builder has announced new projects this year. In fact, even before COVID-19 hit the country, the builders halted their plans for new ventures, frustrated by the new building rules declared last year.
The new norms provided nearly 30 per cent less space for buildings than earlier.
But the suspended work in ongoing projects have begun with partial return of the migrant workers. Majority of the workers engaged in the construction work in the state are from outside the state, most of whom returned soon after the lockdown was lifted.
“Many have returned now and we have arranged quarantine centres at places such as Angamaly and Thrissur for them,’’ said Capt. George Thomas, secretary of Builders’ Association of Kerala.
(P K Krishnakumar is an independent journalist based in Kochi.)