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Home loan interest rates at lowest in many years, take advantage to buy a house now

THREE forces have shaped the real estate market in recent times. Interest rates for home loans are the lowest in many years.

By: | Updated: September 23, 2016 6:50 AM
HomeLoan-L While buying a home with a loan, buyers have two options: fixed rate or a floating rate. Since interest rates are expected to fall further, most people would opt for a floating rate

THREE forces have shaped the real estate market in recent times. Interest rates for home loans are the lowest in many years.

There’s a lot of unsold inventory and demand is low. This slowing down of the real estate market therefore presents an opportunity for interested buyers.

Impact of the home loan rate

While buying a home with a loan, buyers have two options: fixed rate or a floating rate. Since interest rates are expected to fall further, most people would opt for a floating rate. Even a small cut in the interest rate could make a huge difference in the total payment outgo in long tenure of, say, 20, 25, or 30 years.

Since the interest rate has already fallen to a single digit, home buyers can use this opportunity to make their bookings. Home loan is a long-term debt, therefore the ups and downs of the interest rate get averaged in the long run. Therefore, if you are getting a good deal, you should make the most of it.

Unsold inventory

Unsold inventory shows that the gap between the buyer’s expected price and the price at which the developer is ready to sell, has widened. It means there is scope for a discount in the property price.

This is a buyer’s market and the end users are the price decider. On the flipside, an unduly long inventory overhang may result in poor financial health for the developer, and therefore you may be at a huge risk especially while buying an under-construction property.

Low demand buyer’s advantage

Low property demand brings in a liquidity crunch for developers and therefore the project deadlines may not be met on time.

Project delays brings in legal disputes and increase the cost of property due to additional interest burden. Developers come up with attractive discounts and offers to sell their inventories during such periods.

Buyers should use this opportunity, provided they have a good read on the market, the project status, and the credibility of the developer.

Buyers beware

For an end user, whether the market is up or down, whether or not there are discounts involved and cost of borrowing is low or high is not that important.

His top-most priority should be timely possession and undisputed ownership. When you buy a home, analyse local factors such as social and physical infrastructure, amenities, civic facilities, and demand in the area instead of keeping a larger purview.

In a slowdown situation, the chance of a developer delaying delivery is high, therefore, home buyers can lower their risks by narrowing down on ready-to-move homes. With extra precaution, due diligence, and proper advice from an expert, home buyers can lock an attractive deal in the prevailing market situation.

The writer is CEO, BankBazaar.com

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