Buying a house is an important milestone and a lifetime decision for most Indians. After years of saving and diligent planning, one decides to purchase a house. In addition to the increased social stature and financial security implied in home-ownership, a home purchase also helps in big-time tax savings. Also, instead of paying fat rentals, one creates an asset which will appreciate over the long term.
A cursory look at average property prices reveals that overall across the top 7 cities, there isn’t too much variation in 2017 as compared to the previous year. Also, property prices differ in each city and also vary as per the location and its inherent growth drivers. Generally, developers are not in favour of visibly reducing the prices as it transmits negative sentiments in the market.
However, a deep-dive assessment of the market conditions reveals that a pseudo-price correction has come in the form of freebies, discounts, offers, schemes, etc. Also, buyers who sit across the table in a developer's office with a token amount cheque, discounts and reduced prices are surely offered. Developers are battling with huge unsold inventory and in addition, 1.72 lakh unsold units are likely to complete in 2018. With so much ready-to-move-in (RTM) inventory, developers are keen to offload the same at the earliest.
RTM units with Occupancy Certificate (OC) do not attract GST, so purchasing such properties can be beneficial for buyers. In addition, with rising inflation, interest rates are likely to harden in the future, so for buyers, it is the right time to avail of a home loan at the best rates.
All-in-all, this could be the ideal time to purchase a house for end-use. The market is a totally buyer-friendly at the moment. If one has good financial planning and feels that the future is safe, it is the right time to purchase a house and seal the deal.
A home purchase must be seen as a long-term investment, and aptly-selected properties - those in good locations and with the right configuration and amenities - always appreciate over the long term. However, it is important to understand that the fundamentals of location, connectivity, good amenities and legal soundness of the project are essential for price growth to happen.
Also, there are bound to be price fluctuations in the current market scenario. Buyers should keep a minimum horizon of 5-6 years before putting the property on the market again. At the end of a sufficiently long period, prices for the right kinds of properties will certainly have appreciated - and in the meanwhile, if the home is not for personal use, it can earn rental income as well.
The way for normal middle-class homebuyers to address a property purchase is to think like an end-user and focus on buying a home that meets one's own needs. In doing so, one tends to automatically pick properties which have the right attributes - connectivity to workplace hubs, availability of public transport, hospitals, schools and shopping - and is resultantly investing in a property which can certainly appreciate.
Price corrections tend to happen in projects and locations which are bereft of the right fundamentals. Areas which have not taken off because of lack of the requisite civic and social infrastructure, and projects whose legal veracity is in question, are bound to see price corrections as demand will flow to areas and projects which have the right attributes. Prices in locations and projects which tick all the right boxes may remain stagnant for a while, but their inherent advantages will safeguard against any serious short-to-mid-term corrections.
Finally, one should remember that every asset class witnesses fluctuations, but homes are also 'performing assets' which one can live in or rent out. Meanwhile - and keeping in mind that the property needs to have been intelligently chosen - the inevitable laws of demand and supply gradually bring on capital value appreciation.
|Anuj Puri is the Chairman for ANAROCK Property Consultants.|