Sonal Bhavsar-Lodaya, 27-year-old software professional employed with a large consultancy firm in Mumbai is keen to buy a one bedroom hall kitchen flat. Buying a home was always on her mind. The thought of buying a home strengthened after she moved into a rented accommodation with her husband after their marriage. She has been saving money with her husband.
While she chose to invest in fixed deposits, her husband saved money in mutual funds. “We have a budget of Rs 50 lakh. We are ready with down-payment amount. If we like a property we will definitely go for a home loan and buy it,” Sonal says.
Slow real estate market has set the stage right for her and other property buyers.
“Builders were very extremely cautious about launching projects to align supply with the existing buyer demand. This helped sales pick up momentum in 2018. Simultaneously, builders reduced the average property sizes to align their offerings with the highly-incentivised affordable housing bracket. The affordable segment spearheaded residential growth in 2018,” said Anuj Puri, Chairman, ANAROCK Property Consultants.
For the uninitiated, this means that the existing inventory of unsold housing units will be sold if the current demand scenario continues for 33 months. Inventory includes unsold housing units from both old projects and new launches. Inventory of 18-24 months signifies a fairly healthy market. Though the market is still far away from the ‘fairly healthy’ position, experts say that the home buyers should consider finalising the deals.
“The markets have shown a sign of positivity, as seen in 6% increase in sales during 2018 over the previous year. This has come after several years of declining sales trends. For end users, it is also important to note that average prices and ticket size for properties have seen a definite correction. This is true across all markets. Hence, it can be considered to be a good time to start an investment,” said Arvind Nandan, Executive Director, Research, Knight Frank.
Though buying property is at the top of many individuals, two factors still play on the minds. First is the fear of property prices going down further after buying and second is about the home loan availability. The buyers must understand that the property prices are down or moving sideways.
In the year ended December 31, 2018, residential property prices across the top 7 cities increased by a mere 1-2% when compared to the previous year same quarter.
“Housing prices have bottomed out and chances of prices further going down are very low,” says Naushad Panjwani, founder and managing partner, Mandarus Partners, a boutique investment banking firm.
The home buyers should understand that the real estate market is not a homogeneous one. It has some pockets which are weak and some pockets that always go at a premium. Seldom individuals may get the timing right and hence it makes sense to go with a property if it does serve your purpose and within your budget.
There are three options a property buyer has; under-construction homes, ready to move in and resale properties. The resale properties could be the easy game for most home buyers, as there are many real estate investors who are stuck and may give you a good deal given sedate home prices and low rental yields. But these properties are old and you may not get the best and recent amenities that you are not looking for.
The ready-to-move-in houses are the best option as it reduces the risk for the buyer. As a buyer, you can touch and feel the product, talk to your neighbours if there are any, see the shared infrastructure and amenities before you make up your mind. You can also move in quickly and save on your rent. That looks a good deal. But do not jump the gun. Most experts ask home buyers to be diligent with the paperwork.
Thanks to RERA, most of your legwork is already done. The developers are expected to submit all the necessary documents and approvals to the regulator. Do check if the property appears on the website of the authority. You can check the necessary documents online even before you approach the developer.
“Go to the website of the regulator and do check approval and licenses i.e. commencement certificate for work, environmental clearance, approved building plans, allotment letter, and development agreement,” says Surabhi Arora, an independent real estate consultant.
For the ready-to-move-in homes, do check the completion certificate. An important point – do check if the completion certificate is issued for the floor on which your home is located. It is better to go for RERA registered property only. It will ensure that you get what you pay for and if it does not happen, then you have quick recourse in the new regulatory framework.
One should go for an under-construction property, if and only if the builder is giving you a substantial discount. This discount should be material enough considering the interest cost, cost of alternative accommodation, deferred tax benefits and the uncertainty you are exposed to pertaining to timely delivery of home.