Delhi named as top spot for Indian real estate buyers

Delhi is the top spot in India for real estate buyers with a new survey showing that over 34 want property in the city.

Mumbai is second with 28% looking to buy and Bangalore and Hyderabad at 11%, according to the Realty Trends 2010 survey by property website Makaan.

The survey also reveals that the real estate sector in 2010 is going to be driven by end user as most buyers want to live in their property rather than invest for a fast return. The recession and fluctuating property prices has put of speculators.

It indicates that after a year of sitting on the fence, many potential buyers are now ready to move into the market. Those that are interested in buying for investment said they see it as a long term prospect.

Some 67% confirmed they want to live in the property they buy, 23 said they are seeking a long term investment and just 10% were looking for a short term investment.

Meanwhile, analysts agree that the real estate sector is starting to recover with prices edging up, although prices are still a long way from the peak seen in 2007.

‘We still feel there is a lot of inventory build up which will keep prices from moving higher,’ said Ambareesh Baliga, vice president of Karvy Stock Broking.

Developers are, however, still struggling. The rising cost of land and debts acquired during the downturn is hampering any expansion.

Analysts believe that a rash of developers face a debt overhang and current revenues would not be enough to repay loans, despite a rise in residential unit sales in the last two quarters. Buyers may have returned, but developers are still short of money because the payment method in most residential projects is construction-linked where cash is paid in each stage of development. Typically, companies get only a third of a project’s sale value in the first year.

The real estate recovery may be short lived if repayment problems persist. ‘Developers must cut their debt drastically as banks are still cautious and lending on a selective basis,’ said Gajendra Nagpal, chief executive of real estate dealer Unicon Financial Intermediaries.

About three years ago developers took advantage of the days of easy money to embark on an unprecedented expansion spree. But the onset of the slowdown hammered sales as buyers stayed away and banks became averse to lending.

A significant number of developers were staring at defaults to mutual funds and banks last year, but the government rescued them by easing lending norms. Banks not only restructured existing loans, giving a moratorium of one year to pay the principal, but also issued fresh loans.

But these loans are up for repayment in June. In recent weeks some developers have been slashing prices to attract buyers so they can get cash in with loan repayments looming.