People have always been lured by the idea of owning land or property. History has witnessed civilizations go to wars over land ownership. Real estate has always been synonymous with power and wealth, and is not a novelty in the personal finance space. Today, home loans are easily available, affordable housing projects abound, and real estate continues to be coveted.
However, like any other investment instrument, real estate too has its swings and unpredictabilities that are driven by market conditions. For example, in the last few years, the real estate market has been sluggish, unable to beat inflation, and has been fetching low returns. Stagnant, high prices of properties have posed challenges in terms of affordability as well.
The Aspiration Index survey conducted by BankBazaar across 12 metro and non-metro cities across India in July 2018 found that millennials (between the age group of 25 to 35 years) still see acquiring a house as their biggest aspiration, though affordability is a challenge.
While 69 per cent of millennials today aspire to buying a house, only 57 per cent have a house (includes inherited property) or are financially ready to buy a house.
Is it the right time to buy a house?
Like in the stock market, timing the market is difficult with investments in real estate. It is hard to predict what kind of gains you’ll make in the future. However, if you have been wanting to buy a house to reside in, or to rent out, this is a good time to enter the market.
There have been some structural changes to the housing sector with a push for affordable housing across the country, the introduction of RERA, and availability of low-cost loans. While the time isn’t ripe to sell any property you currently own, this is when you stay invested in your current property, or buy/upgrade to your dream home. So what makes it favourable?
A buyers’ market
Stagnant prices and excess supply have led to a huge inventory of unsold houses. With the introduction of RERA, builders are trying to complete ongoing projects in time, and get rid of existing inventory. Before RERA, there was no real estate regulatory framework, and builders could take buyers for a ride, not delivering projects on time and diverting funds from one project to another. The enforcement of the RERA has increased transparency in the housing sector.
As a result, the number of ready-to-move houses are still high while the launches of new projects are fewer. This puts the buyers in a stronger negotiating position to get a good deal. Builders are also offering discounts and goodies such as free parking space and free club membership along with the property to clear inventory.
A push for affordable housing
The government’s initiative to make housing affordable for the low and middle income segments of the urban population has seen several private players come up with low-budget projects. Affordable housing developers enjoy cheaper sources of funding, including external commercial borrowings, and they get more time to complete the projects.
Under the Pradhan Mantri Awas Yojna, the budget allocation for the economically weaker section (EWS) and lower income group (LIG) has been increased to Rs 10 billion this financial year. This came in an effort to increase affordability in these segments, which constitute a large part of the urban shortage.
First-time home buyers get a 4 per cent rebate on the interest charged for a loan amount up to Rs. 9 lakh, if the income is between Rs. 6 lakh and Rs. 9 lakh. For loans up to Rs. 12 lakh and incomes between Rs. 12 lakh and Rs.18 lakh, there is a rebate of 3 per cent on the interest associated.
Overall the focus is shifting to a micro level from premier housing. Consider this as an opportunity to buy a property as a residence or to rent out. While property prices are seeing a slow paced correction at the moment, your rental income could see a consistent 10 per cent increase every year.