Distress sale of homes looms over IT land

The dream house is turning out to be a nightmare for some. With jobs gone, many professionals in India’s infotech hubs face the prospect of having to default on loan repayments and lose their homes. Realty brokers see a phase of distress sale coming as early as next month.

Case 1: Aditi and Rajesh Shah both worked in a multinational in Bangalore. Three years into marriage they bought their own pad, a Rs 40 lakh house, close to their office in Electronic City. In the meantime, the IT boom became history and Rajesh got the pink slip. They now find themselves stuck with a property for which they cannot pay EMIs. They have decided to sell it.

Case 2: Vishal Anand, working in a large multinational in Gurgaon, bought a flat in Vasant Kunj of South Delhi last year. For the Rs 64-lakh flat, he made a Rs 14 lakh down payment. A housing finance company funded the balance Rs 50 lakh.

Hear him out: “All my saving are gone in the down payment. I am committed to pay a monthly EMI of Rs 48,000 on the loan. I can’t save a penny any more. My wife and I realise it is not worth the while to pay that kind of EMI. We can sell our flat and take one on rent for Rs 20,000 a month. We are not even looking at making some money from selling our flat. On the contrary, we will happily forgo some of our investment, provided we get a buyer for it.”

Many other young house owners are also looking for buyers. “I have had at least 10 enquiries from people who want to sell their properties,” said Ali, a broker who operates in the Koramangala area of Bangalore. The area is full of IT professionals.

According to industry experts, close to 10,000 IT people have lost their jobs in the current downturn of the poster- boy industry of India. Many of them would surely have bought homes in the past few years, which was boom time for both IT employees and realty developers and brokers. Since 2003 till last year, about 25,000 homes have been sold in Bangalore every year.

Pinning hopes on rapidly rising salaries plus bonuses, IT people had lapped up properties in Bangalore, Gurgaon, Noida, Pune and elsewhere. Almost all of them took loans to make their dream home come true.

Some defaults have been reported by banks. But the number of properties repossessed by them is not significant yet. “We have not received any queries for selling properties bought with bank loans. We are, however, keeping tabs on loan repayments,” said Canara Bank chairman and managing director A C Mahajan.

Corporation Bank has received requests from IT people to reschedule their home loans. It could be “either because they have lost jobs or salary hikes have not been as expected”, said the bank’s general manager, B R Bhat.

“It is the impact of the global downturn. We are trying to help by taking a soft stand and allowing these people to delay or part pay their EMIs until their situation stabilises,” he said.

Even in such a distressed market, there are people who want to buy homes. But they are being advised to wait for distress sales to begin and prices to further drop.

Case 3: Jaideep Anand, who works for a software product company in Bangalore, wants to buy a flat in the ITPB-Whitefield area and move out of his rented home. He has visited a number of realty brokers, all of whom advised him to wait till next month or February. “All of them expect distress sales by IT professionals,” Jaideep said. Brokers told him that he could hope to buy a home at 30 to 40 per cent of the original price from a distressed seller.

For those who always cherished the dream of having their own homes, the first two or three months of 2009 could be the best time to do so. “That will be the ideal time to invest, if you have the ability to wait,” Ramider Grover, chief executive officer for homebay residential of Jones Lang Lasalle Meghraj, said,

“The market will not see such low rates again, and the demand for properties is as high – if not higher – than ever before. But remember, by delaying a purchase too long, you can lose out on the best properties and also on the best rates and add-on incentives,” he added.

(Inputs from Mayur Jha and Preeti Mishra)

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