In the backdrop of the changing realty climate, a critical question that the prospective buyers are facing is whether to buy a home in 2020 or defer their investment plan until the market regains stability. Here’s our answer,
The COVID-19 pandemic has exacerbated the homebuying trend in India. With widespread job losses and salary cuts, prospective homebuyers are petrified of what lies ahead and prefer to hold back their cash reserves. Wealth managers are also advising their clients to preserve their savings rather than investing in a house which is a multi-year commitment and involves a hefty outgo of funds. Besides, the crash of the stock market has also taken a beating on the investors, compelling them to adopt a wait and watch approach. Nevertheless, the real estate experts opine differently and urge the prospective homebuyers to come forth and leverage the market sentiment as it is the most suitable time for investment, given a horde of measures and relief policies announced by the Central Government.
Why is it a good time to invest in residential real estate?
Today, real estate is a valued and stable asset class because of the multiplier effects of healthy living in a well-planned residential community. Besides, home loan interest rates have reduced to record lows, and markets are currently end-user driven with renewed activity in the affordable and mid-income segment. Therefore, now is the time for potential homebuyers to take the plunge. Moreover, accelerated adoption of digital platforms, new-age payment methods, virtual tours and 3D walkthroughs render the asset experience online without compelling the buyer to step out of the comfort of their home. All these factors together make residential real estate a suited investment product in the present scenario.
According to Amit Goenka, MD and CEO, Nisus Finance, “The Reserve Bank of India (RBI) has announced a slew of measures to ease liquidity for banks, Housing Finance Companies (HFCs), Non-Banking Finance Companies (NBFCs) and borrowers including the real estate developers. Besides, home loan rates have come down from eight percent to 6.7 percent as the public sector banks pass on the repo rate cuts to borrowers. Holistically, the current interest rate environment provides an advantage to the borrowers to obtain loans at competitive rates. The asset prices have also witnessed a sharp correction and may provide a significant upside with respect to price appreciation in the future.”
Developers and sellers are also offering attractive payment plans, gifts and discounts to lure buyers. As builders walk a tightrope, homebuyers can drive the deal and turn the situation in their favour. The secondary market also unfolds a host of opportunities at attractive valuations as many homeowners are engaging in distressed selling or offering marginal rebates to offload the property.
Moreover, presently developers are focusing on consolidation and reducing supply due to liquidity constraints. This may push the asset price upwards over the next 3-5 years. Hence, the market dynamics are in favour of homebuyers this year, and the prospective buyers should make the most of it.
What are the precautions that a prospective homebuyer must undertake?
Post COVID-19, prospective buyers should adopt a cautious approach in finalising their home and not fall prey to attractive offers/discounts offered by developers. Exercise due diligence in buying a unit and assess the capacity of the developer in completing and delivering the project. It is imperative to ascertain the financial capability of the project and the features incorporated to ensure social distancing, wellness, health and safety within the development.
“Rental yield and EMI to rent ratio are the crucial matrices to identify the investment potential of a property. Besides, homebuyers should also consider the full cost of long-term ownership, such as maintenance charges, utilities and property tax; and usage costs such as annual club fees or paid facilities.”
What to buy?
As per the recent surveys, the average age of a homebuyer has come down from 35-40 years to 25-35 years. Millennials and young buyers who were earlier preferring light asset lifestyles, including rental homes and co-living spaces, have started considering home purchases in the post-COVID environment. The need for ownership, safety and the pride associated with self-purchased homes drive the housing demand in the market.
As per estimates, nearly 75,000 new buyers will be added to the standard offtake of 3.5 lakh homes each year, taking the residential demand to new highs. With the home loan rates at a 15-year low and asset prices coming down by around eight percent on an average since March 2020, homebuyers should take a plunge and fulfil their long-wished dream.
Disclaimer: The views expressed above are for informational purposes only based on industry reports and related news stories. Nivasan Homes does not guarantee the accuracy, completeness, or reliability of the information and shall not be held responsible for any action taken based on the published information.