'It's Better To Pay A Higher EMI And Buy A House'

Interview: Pranav Ansal Vice-Chairman & MD, Ansal API


Even if loans are expensive, Pranav Ansal, vice-chairman and managing director, Ansal API, says people would be better off paying higher EMIs than continuing to stay on rent. At the same time, he feels that competition will make developers offer something extra to homebuyers and that mid-income housing is where the real market is as most buyers are looking for homes in this space. Excerpts from an interview with Urmila RaoHow would you term the current real estate market scenario? Is it price correction or a crash?It is not a crash. There has been no dip in the sales of projects by major developers. The products of reputed builders are selling and their volumes are still the same. However, a lot of new builders with credibility issues are not able to sell because customers are skeptical about putting in money fearing failure in delivery. The slowdown has happened only to this extent.Industry body Assocham’s report says that the banks’ home loan disbursal rates have declined. Rating agency Fitch recently talked about a 16 per cent drop in home registrations in Mumbai.There have been no dips at all in some markets. We operate in 16 cities in northern India and I have not seen a decline in any of these cities. I also don’t see any decrease in sales in Mumbai. HDFC has seen 60 per cent growth in home loans. Well, they were expecting 100 per cent growth, and it is just 60 per cent. But still, there is growth.How do you justify the discount offers, freebies and schemes that even reputed developers are offering? Are these not a strategy to boost falling sales?If the market is very competitive, then people have to give various sops. It’s a part of marketing in areas where there is oversupply. We did that in some of our projects. But in projects where there isn’t too much competition, we don’t offer anything. Sops are purely a result of the demand and supply equation. In cities like Lucknow and Jaipur, where we are the largest developer by far, we don’t give any sops. Our scheme of EMI holiday (paying EMIs after the possession) is the future for all property transactions. Ten years down the road, 90 per cent of the homebuyers will be on EMI holiday schemes. Why didn’t the EMI waiver scheme start earlier when the residential market was on an upswing?Yes, the scheme started just one-and-a-half to two years back. The builders went to the bankers and it took time for the banks to understand and get involved in this scheme, do the paperwork and get clearances. Now, the EMI waiver scheme has started even for commercial projects. Freebies are a function of competition but the EMI holiday scheme is what the market is going to be in the future.Will we see an end of the schemes when the market firms up again?The EMI waiver scheme will stay. The sops will stop.What is your advice to the end-user buyer at a time when home loan interest rates, inflation and premium housing costs are up?People buying homes fall in two categories—those who want to move out of joint families and those who are living on rent. Rentals are increasing at a pace much higher than inflation. So, it still makes sense for a customer to pay a higher EMI and buy a home. This move has two advantages. First, from the point of view of income tax benefit and second, ownership of property. Unlike rentals, payment of EMI for 15-20 years gives a person ownership of the property, creating an asset for him.Of course, price increase is a concern because earnings have not risen that much. But, more than earnings, this is linked with the rental outgo. A person could get to own a property after 15-20 years if takes a call and pays the higher home loan interest rates now. But, if he doesn’t, then he will have to pay a much higher price after 15 years. That is why property transactions happen despite higher inflation.So, a person staying on rent should consider buying a home?Paying rentals does not end up in ownership even after 10 years. Also, you will maintain a rented house only up to a certain standard. You don’t want to invest a lot in maintaining a house that you don’t own.Many developers are getting into mid-income housing. Is this a new trend?Mid-income housing is where the market is. Almost 90-95 per cent of the country is mid-segment buyers. Premium housing accounts for only 1-2 per cent of the market in India. Many developers are building premium housing simply because it adds to their profile. Developers who realise the demand for mid-income housing and cater to it will always be there. Niche market is very exciting and tempting, but is a very small market compared to the mid-segment market. This segment is here to stay. How do you define mid-income housing?Every city has its own definition depending on its income brackets. So, for Delhi NCR, mid-segment is Rs 50-75 lakh. Most of our projects in Gurgaon, Noida, Greater Noida and Ghaziabad are in this range. In Kundli, it’s about Rs 40 lakh.What can we expect in the coming year?Major developers will not have delivery issues, but a lot of new developers will not be able to cope up and some of the projects will never see the light of the day. So, automatically, supply will come down and the value of deliverable properties will go up further. This is the fourth slowdown that we are seeing in 40 years of our operation. This time it is even greater because there are more people in the business and a lot of them will have serious issues. In one to one-and-a-half years, we are likely to charge another 5-10 per cent premium on our products owing to our credibility