This is a great time to buy a home. Interest rates on home loans have been trending downwards for over three years. There are expectations that the rates will fall further. Recently, State Bank of India reduced its home loan rate to 8.30%. Real Estate (Regulation and Development) Act (RERA) has come into play to protect the interests of home buyers. And a broader slow-down in the real estate market means there are good deals abound. But this still leaves us with the all-important question: is this a great time for you? Let’s examine some thoughts that help you make the shift from renting to buying.

Located the ideal property?
Locating the dream property is challenging and can take you months. The property should satisfy your material needs, fit your budget, and provide your family comfort and utility for the foreseeable long-term. But it also needs to pass legal scrutiny. Before you enter a sale agreement, make sure you’ve had the property papers vetted by a legal expert.

Why do you need this house?
Why are you buying this house? Is this because you want to live in it? Or are you simply making an investment? There are pros and cons to consider for both options. For example, buying a property in India makes little economic sense in the short term, and the costs are oppressively high compared to the costs of renting. However, the long-term benefits of buying are capital appreciation, peace of mind, tax benefits, and the surety of a roof over your family’s head. If your objective is to invest, you must consider factors such as opportunity costs, lack of liquidity, and risks such as the possibility of incurring a loss. Real estate has traditionally been considered a safe haven. However, any investment is a bet and returns are rarely guaranteed or time-bound.

Ready with cash?
A home is typically the biggest financial transaction in most people’s lives. Often, a loan is required to make the purchase possible. But a loan won’t fund the entire cost of home buying. If a home costs Rs. 100, the costs of registration, stamp duty, repairs, furnishing, brokerage, paperwork etc. will take your final cost to Rs 110 or 120. A typical home loan could fund you up to Rs 70-90. The rest – Rs 30 to 50 – needs to come out of your pocket. You need to be ready with this cash to make the purchase possible. Remember that you should avoid taking multiple loans since this would stretch your finances and expose you to the risk of default. If you’re ready with the cash, let’s move on to the next step.

Can you keep it for long term?
Whatever be your reason for buying the house, you should be prepared to hold on to it for several years to maximize your benefits. If you intend to live in it, the buying costs would only be justified in the long term. If you intend to keep it as an investment, your best returns may only arrive several quarters or years down the line while the real estate market goes through its cyclical ups and downs. Living in your own home also means that you would feel tethered to it. You may find it financially challenging to leave it to go live elsewhere on rent. You need to be sure the house can provide you the comfort and utility you need without impacting your other needs such being able to commute to work comfortably.

Are you ready to borrow & repay?
Lastly, if you’re taking a loan to fund your property purchase, it becomes your moral, legal and financial obligation to repay it. Firstly, you need to assess your loan eligibility. If you already have too many loan balances in your name, you may find it challenging to take more loans. If you do get a home loan, and if you keep repaying it in a timely manner, you keep earning tax benefits and boost your credit score little by little. But this also means you need to have a stable career and income.

The writer is CEO, BankBazaar.com