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Prospective buyers must make a well-considered decision regarding whether this is the right time to buy a house, particularly with home loan rates at near-peak levels, and the risk of job losses looming in many sectors.
Indians seem to be on a home buying spree after the Covid pandemic.
According to the ANAROCK Group, the financial year 2023 saw record sales volume across the top seven cities, with approximately 379,000 units sold, down 36 per cent over the previous year.
Total sales amounted to around Rs 3.47 trillion, a 48 per cent rise over FY22.
"After experiencing the lockdowns, Indians have come to realise the value of home ownership over renting," says Santhosh Kumar, vice chairman, ANAROCK Group.
Adds Vivek Rathi, director of research, Knight Frank India: "Despite the 250-basis-point increase in home loan rates, which has reduced house purchase affordability by close to 15 per cent, buyers have continued to take the plunge."
Prospective buyers must, however, make a well-considered decision regarding whether this is the right time to buy a house, particularly with home loan rates at near-peak levels, and the risk of job losses looming in many sectors.
Prices moving up
In the post-pandemic period, the housing market has witnessed a surge in volumes. With inventory levels coming down, prices have begun to climb, albeit at a gradual pace.
"The mid and premium segments, where sales momentum is stronger, have seen a significant increase. The affordable segment has lagged.
"Prices rose in the range of 1-7 per cent in FY23 in the major cities. Bengaluru, Mumbai, and Hyderabad appreciated the most at seven, six, and five per cent respectively. Prices remained stagnant or declined in most other markets," says Rathi.
If the price rise gathers pace this year, delaying the purchase decision could prove counter-productive.
Interest rates at or near peak
After a significant increase, experts are of the view that interest rates have peaked in the current cycle.
Any decline in rates this year would provide a boost to housing.
Nevertheless, experts advise buyers not to base their purchase decision on the future trajectory of interest rates.
"Predicting future interest rate movements with certainty is challenging, even for financial experts. While interest rates could decrease in the coming months due to inflation coming under control, waiting for interest rates to drop carries the risk of missing out on suitable property options or potential price appreciation," says Anuj Sharma, chief operations officer, IMGC.
The same principle applies to prices.
Says Rathi: "In a typical holding period of 20-plus years, the buyer will see two-three price cycles.
"Gains will moderate to the long-term average. Those buying for end use should not try to time either the house price or interest rate. Proceed with the purchase if you can afford it."
Consider repayment ability
While India's housing market is buoyant, the global economic outlook remains uncertain.
Several developed world countries, including the United States, are still at risk of recession, which could result in job losses in developing economies like India, with implications for the ability to repay home loans.
"Evaluate your financial situation, including income, expenses, and other financial obligations, before taking a home loan.
"Make sure you can afford the mortgage payments, even in the event of a job loss," says Raj Khosla, founder and managing director, MyMoneyMantra.com.
He suggests creating an emergency fund with enough savings to cover several months' worth of household expenses and EMIs.
He also favours buying home loan insurance.
Kumar notes that people working in sectors related to information technology should be especially cautious.
Go for ready-to-move in
Opt for a fully-constructed property to save on rent and avoid the uncertainty arising from delivery delays.
"Prefer a ready-to-move property if you are buying from a developer who is not highly reputed or doesn't have a reliable track record," says Kumar.
But, he says, if you are buying from a branded developer with a strong reputation for timely completions, you may consider an under-construction property, provided the price difference is attractive.
Before buying an under-construction property, thorough research is essential.
"Conduct due diligence on land title, project approvals by municipal and RERA (Real Estate Regulatory Authority), and liveability in case of a developing location," says Rathi.
Disclaimer: This article is meant for information purposes only. This article and information do not constitute a distribution, an endorsement, an investment advice, an offer to buy or sell or the solicitation of an offer to buy or sell any securities/schemes or any other financial products/investment products mentioned in this article to influence the opinion or behaviour of the investors/recipients.
Any use of the information/any investment and investment related decisions of the investors/recipients are at their sole discretion and risk. Any advice herein is made on a general basis and does not take into account the specific investment objectives of the specific person or group of persons. Opinions expressed herein are subject to change without notice.
Feature Presentation: Ashish Narsale/Rediff.com
