Despite a reduction in the number of new unit launches, the market seems to be in a self-recovery mode and this festive season is probably the most appropriate time to invest in real estate.
By Surabhi Arora
Is this festive season the right time to buy a property? Recently, this is the most frequent question given the cautious buyer sentiment and stagnant residential prices. In the last nine months, the market is impacted by one after the other events such as demonetisation, implementation of Real Estate Regulation & Development Act (RERA) and the Goods and Services Tax (GST). However, despite the reduction in the number of new unit launches, stagnant prices in the last couple of years are demonstrating that the market is in a self-recovery mode and timing is probably most appropriate to invest in real estate. There are combinations of market forces also which will push the residential sector on the road to recovery.
Now, let’s talk fundamentals and see the 5 reasons to buy a home during this festive season:
1. Strong Economic Outlook – Most of the people will agree with me if we say that the impact of demonetisation is fading away. The economy is in a sweet spot with GDP expected to grow at more than 7%, and inflation tamed down significantly. According to the Oxford Economics city ranking report, out of top ten growing cities in the world six belongs to India. Besides the quantitative evidence, qualitatively also we can see a lot of initiative by the government such as Smart Cities, Make in India, Start Up India, Ease of doing business, etc. In fact, our international relationships and business confidence are improving. thus, there seems to be a strong case for India to continue to be on the path of growth trajectory in the coming years. Thus, as far as the macro economy is concerned, it is just right time to invest.
2. Demand likely to improve – In my opinion, even if the sales velocity is low in the past couple of months, the demand is still there. In the previous three years, office sector recorded above 90 million sq ft of office absorption. Despite concerns of layoffs due to automation and technology skill gap, companies from sectors like IT/ITeS, e-commerce, FMCG and BFSI seem to be on the expansion spree. Buoyant office sector absorption in these cities not only created jobs but also build a level playing field for future residential capital and rental value appreciation.
3. Buying is becoming cheaper – Additionally, it would not be wrong to state that the past few months have made the home buying relatively cheaper. Lowering of interest rates on bank loans has bought the vigour back in the sector. Currently, the home loan rates are as low as 8.2%. From the end-user’s perspective, it means lower monthly EMIs and lesser interest burden. Banks have introduced new home loan schemes offering flexibility in interest moratorium and principal repayments to bridge the gap between affordability and residential demand. Unlike before, such schemes are targeted at urban young working professionals who have both the appetite for home ownership and repayment capacity. Moreover, if one is buying a home for the first time and the annual income is below Rs 18 lakh, he/she will be eligible for interest subsidy of 3 to 4% under Pradhan Mantri Awas Yojna (PMAY) which makes the houses even more affordable.
4. Availability of plenty of options in ready-to-move-in segment – With RERA getting implemented there is a rush among developers to finish their under-construction projects and to offload their unsold inventory. The arbitrage between primary and secondary market is lowest at present. The buyer today has the liberty to choose from the extensive options available in the market in both ready to move in and under-construction projects.
5. Festive Offers – Lastly, the country-wide slump in residential sales and liquidity crunch has prompted property developers to introduce aggressive marketing tactics. Developers dole out freebies and discounts around festive periods such as Navratras and Diwali. From modular kitchens to air-conditioners, Apple accessories to international holidays, developers woo the reluctant buyer with these freebies depending upon the ticket size. Construction-linked plans, no EMIs until possession, flash sales and cash discounts are just some of the other incentives available in the market today. The market is flooded with offers and incentives from developers, thus indicating a buyer’s market.
According to fundamentals, one should buy when it’s a buyer market. In my opinion, the actual reason for lower sales volume is not the price points, lower demand or economy; it is the lack of confidence in the overall sector due to prolonged project deliveries, quality issues, absence of regulators, etc. All these issues are making decision making slow and impacting the sales velocity. However, with RERA getting implemented in almost all the cities, the buyer sentiments are bound to improve. RERA will help to solve the issues of prolonged project deliveries, quality problems due to its stringent clauses and penalties.
But when I say, this is the right time to buy the advice comes with a caveat which says, “It is an appropriate time to buy but not anything or everything”. Here comes the role of due diligence and research. Go for RERA-registered developers with a good track record, opt for the best suitable financial payment plan and buy your dream home.
(The author is Senior Associate Director, Research, Colliers International India)