We Indians are fixated on the idea of “owning” our own dream home. Sometimes, even when financially and practically it makes more sense to stay on rent owing to reasons like tax saving to easier movement as and when required, we still feel “settled” when we move into “our” home. So undeniably, a lot of thought is put into this decision which involves a significant portion of our savings to be diverted towards building this asset.
In the last decade, the average age of the Indian home buyer has reduced by almost 10 years with 30 years olds investing into their first homes. A lot of them may use this investment as a stepping stone towards moving to a larger property, while some others may look at it as their abode for the next few decades. Whichever the case maybe, for those evaluating buying a house soon, here are some of the reasons why you may consider buying that dream house of yours this financial year:
The recent move by the government to award infrastructure status to affordable housing, coupled with certain incentives for developers, is expected to boost development activity in this segment of housing. Several private developers are in the process of preparing their strategies and sketching out their plans towards development of affordable housing in the top cities as well as the tier 2 and tier 3 ones. Not only developers, even financing institutions are sensing opportunities in this sector, especially in some of the growing cities in India and are evaluating projects to back with their funds. Closer to the typical auspicious home buying season of Diwali, one should see a number of projects launched under this segment. Hopefully, with the Real Estate (Regulation and Development) Act (RERA) kicking in by then, these projects would be governed by the laws laid out as per RERA and should see a timely completion as well.
The budget measures that have been introduced also include easier access to institutional credit including foreign funds at a cheaper cost. With this, developers should be able to lower their borrowing costs which would imply a reduction in the overall cost of construction. This may or may not directly translate into reduced sale prices. However, it will surely translate into more number of houses coming up; and with more supply and competition, will mean competitive and consumer driven pricing.
Overall, interest rates have come down and are much more favorable for home buyers at present. Since Jan 2015, RBI has reduced policy rates by 175 bps but banks were slow in passing on the lowered interest rates to borrowers.
RBI has now introduced a new methodology for benchmark lending rates to be used by banks i.e. Marginal Cost of Lending Rate (MCLR). MCLR, introduced in April 2016, is more dynamic vis-à-vis the old base rate regime resulting in passing on part of the policy rate cuts to borrowers relatively faster. Further, because of the demonetization drive, banks are flush with low cost deposits resulting in reduction of MCLRs across the large banks. The reduction in the marginal cost of funds provides new home buyers a wide range of loan schemes to choose from.
Another change brought about in this year’s budget is the restriction on cash transactions upto INR 300,000. This will help curb the artificial price hike in the residential sector, particularly in the sale of secondary units.
The residential market has been subdued for a while now in most cities. Sales have been stressed and developers are under pressure to offload their inventory. This thus gives the perfect opportunity to buyers to get better bargains. Developers are also recalibrating their strategies towards reducing the ticket size of apartments thus making it more attractive for a buyer. A home buyer today has more options to fit things according to his requirement.
With RERA becoming applicable soon across states, efforts are on by the government to streamline the systems of approvals and to adopt a single window clearance for developers. Very soon, with GST in place, there will be an audit trail for better control and monitoring of the sector. This would all thus lead to more transparency and better efficiency in the overall real estate development process, eventually benefitting the home buyer. All in all, if you are a first time buyer and are scouting for a house, it is a good time to evaluate and buy out that house this financial year.
The author is associate director, valuation & advisor Colliers International India
Source / Author : Divya Seth, HT Estate, 29 Apr 2017, Delhi