Amidst apprehensions, will property market lift?
With RBI Governor raising the Repo rates tenth time in one year, interest rates rise is a foregone conclusion. Moreover high food inflation, rising fuel prices and over all depression
have dampened the spirit of new home aspirants. Once again they are in the self questioning mode – Is this the right time to buy a house? Am I well – equipped to be a proud owner of a home? How will property scenario unfold? Will interest rates rise? Which is a good lender? What is in store for home loan aspirants?
For these and many such questions, read on…
Though interest rates may be on upward swing, but it seems property market after almost two year long struggle, is moving towards gradual consolidation. It is expected that it will fathom a comfortable foothold in the coming financial year, if not take a big leap. It seems the times are changing for real estate industry but it has to brave many challenges in the times to come. There is no denying that industry is several tons wiser owning to the slowdown of past two years. The struggle has made every body associated with industry stronger and wiser, even customers. While swinging into dilemma – to be or not to be the home owner, customers utilized this period in researching various aspects related to home purchase be it identification of property, tracking property prices or interest rates offered by banks/ lenders. Now that the scenario seems to be brightening up, and customers are equipped (knowledge wise), the home buying activity may witness some traction. Some other factors like rational pricing, good discounts, timely deliveries and availability of quality flats may push the property sales. The affordable housing will be the flavour of the season and the segment will see expansion not only in metros like Mumbai, tier I and tier II cities but also in many smaller cities.
Commenting on the property prices which are the major concern for home aspirants, Mr. Uday Dharmadhikari, CEO, Usha Breco Realty says, “Due to the rising input cost, it is difficult to predict the property prices for the next couple of months. However, there will be a softening of property prices in the market and the factors affecting are affordability, extent of housing loans, reduction in the raw material prices and over supply in certain segments. But the outlook for 2011 would generally be positive and the residential segment will continue to be in demand particularly, Affordable Housing.”
Providing his view point, Mr. Harsh Roongta, CEO, Apnapaisa says, “As far as real estate industry goes there is a need of a common regulator as industry has been reeling under want of several permissions at multifarious places, huge input costs, deliberate loose rules in zoning and FSI etc. which is promoting rent seeking. There is a need for clear cut rules and procedures, moreover there is a need to provide better access to bank financing.”
Supporting the view, Mr. Amit Goenka, National Director – Capital Transactions, Knight Frank India says, “Regulatory body is absolutely important for the sector as it will certainly help developers and consumers alike. Last year some move in the direction was taken by Ministry of Housing and Urban Development but it did not make a headway as it is a very state specific subject like GST and VAT hence it is difficult for Union Ministry to implement it. Unless all states come together for the cause, it will not be possible to implement it. Till then things will remain painful for developers as well as consumers.”
Industry watchers feel that the time is always ripe for the first time buyers, mantra is bargain and bargain some more especially if they are planning to make their buy, home. Says, Dharmadhikari, “If you need a home, you should go ahead with buying plans, identify a suitable property matching their budget, and negotiate the best price with the developer. Holding your plan till winter may not yield desired results. Still customers should go ahead for the home loans, if you need the house today and if you have paying capacity for the foreseeable future.”
“Home Loan interest rates will inch up a bit in the coming quarters, whereas property rates will cool off as there has been a too steep an increase in the last two years. In such a scenario customers should identify the property and make a near ‘unreasonable’ offer to the builder which may not be acceptable to him now, but he will come back in few months time,” adds Mr. Roongta.
As far as outlook for the year 2011-12 is concerned, Goenka says, “ The outlook is very bearish for major part of the year, it will start improving only in the last quarter of the financial year. Also on the back of low supply the valuations have risen beyond expectations, rather have peaked. As the interest rates have gone up, the net investible surplus of the consumer has gone down and home budgets have gone up. This makes most of the homes out of reach for the customers in Mumbai. Also there has been erosion of confidence in the ability of the developer to deliver in time.”
Everyone needs a home loan to build or purchase a house and sooner the better. People who construct or purchase a home early in their life get longer loan tenure and get sufficient time for accumulating money for their expenses in the later stage of their life like children's education, marriage etc. But it is important that you do some calculations around your requirements like the loan amount you are eligible for. For this calculation you can visit price comparison engines which will enable you to know the amount you are eligible for. Banks have different ways to calculate loan eligibility. If loan eligibility based on your income is likely to be an issue, then talk to several banks to find out which bank can give you the maximum amount.
For home loan aspirants, Mr. Roongta advise, “Customers should shortlist four or five banks and get the short listed banks to compete for their loan. The cost of the loan depends a lot on one’s ability to negotiate. Remember that all terms and conditions of a housing loan are negotiable. Interest rates offered by banks take your income and repayment profile into consideration, apart from, of course, your negotiation skills. Apart from interest rates, also check various charges like processing fees, pre-payment charges, legal fees, valuation fees and other hidden costs.”
Moreover you should also know the down payment you will be required to pay as this is a safeguard against the scenario. In case the value of the house goes down in future, your down payment ensures that the bank's interest is protected by ensuring that outstanding loan amount is less than the saleable value of the property. Once you decide on your dream property, the bank will get the cost of the property evaluated by its own personnel.
If you take a home loan then you are entitled to tax benefits on the interest and principal repaid to the HFC or bank.
“There has been a lack of demand so it is important to cut prices to bring back the demand. This especially applies to Mumbai, Gurgaon properties and to some extent Pune but not to other cities. There is no evidence of great price reduction except for certain areas with high end properties where people are willing to climb down on prices. Moreover the offers should be enticing enough for customers to buy,” concludes Goenka.
Hope realtors are listening!
(The Author, Bienu Vaghela is the Chief Editor of Apnapaisa.com)