Want To Buy A New Home? Read This

Look at the sanctioned plan to know the exact carpet area you will get and pay a law firm to conduct a thorough title check.

IMAGE: High-rise residential buildings in Mumbai. Photograph: Francis Mascarenhas/Reuters

Housing sale is displaying strong momentum. Data from Anarock Research shows that an unprecedented 120,000 units were sold across the country's top seven cities in the third quarter of 2023, a year-on-year increase of 36 per cent.

Prices are also rising in double digits: they were up 11.4 per cent on average over this period.

Buoyant sentiment

The COVID-19 pandemic sparked the desire among people to upgrade their homes both in terms of size and facilities.

Says Vikas Wadhawan, group chief financial officer, REA India & business head, Proptiger.com: "Many wanted a home with an extra room.

"People also realised the importance of owning a home within a society where most facilities would be available within the campus."

Anuj Puri, chairman, Anarock Group attributes the sales momentum to the RBI maintaining the repo rate constant.

"This has stabilised home loan interest rates and kept buying sentiment high," he says.

Currently, the supply coming into the market is largely from branded developers.

"This aligns well with the shift in buyer preference towards large, listed developers," says Puri.

The setting up of the Real Estate Regulatory Authority (Rera) has boosted customer confidence.

Says Anand Moorthy, co-founder and chief business officer, asset management services and data intelligence, Square Yards: "Projects are now reaching completion without significant delays."

Wadhawan asserts that government investment in infrastructure over the past five to seven years has provided a fillip to housing.

While rising prices generally dampen demand, the opposite is happening in the real estate market.

"Increasing prices accelerate purchase decisions as prospective customers are struck by FOMO (fear of missing out). They feel if they delay the purchase, they may end up having to pay a higher price," says Wadhawan.

Higher interest rates have so far failed to dampen demand.

"Customers feel that any gain they derive from waiting for rates to soften would get nullified by the increase in price," says Wadhawan.

The relative strength of the Indian economy has also kept the demand momentum intact.

A few risks

Inflation and interest rates could play spoilsport.

"Persistent inflation could force buyers into a wait-and-watch mode. Rate hikes in future could also act as a short-term dampener," says Puri.

If next year's general election ushers in an unstable government, that would be another setback.

Investors returning to the market

Investors, who had quit the market between 2013 and 2020, are now re-entering it.

According to Anarock Research data, of over 115,000 homes sold in the second quarter of 2023 across the top seven cities, over 43 per cent were in newly launched projects.

"The growing acceptance of newly launched units shows investors are back," says Puri.

Get title verified

End users should ensure that an under-construction property is registered with Rera.

"Make sure the phase you are investing in is registered," says Wadhawan.

Read the sale agreement before signing it.

"It must be in the Rera-prescribed format and must not be skewed in the developer's favour," says Moorthy.

Look at the sanctioned plan to know the exact carpet area you will get and pay a law firm to conduct a thorough title check.

Buyers should also stress test their own affordability.

"Your equated monthly instalment (EMI) based on peak interest rate scenario should not exceed 30 per cent of your take-home salary," says Abhishek Kumar, Sebi registered investment advisor and founder, SahajMoney.

Go for limited-sized projects

Investors should stick to quality developers and locations.

"An investment in a property by a branded developer in a quality location (with well-developed physical and social infrastructure) can prove fruitful," says Puri.

Moorthy warns against investing in areas with high supply. He also suggests avoiding very large projects.

"The supply from the developer continues for a long time, making it difficult for investors to earned good returns," he says.

Wadhawan suggests finding whether the developer has a lock-in clause or will demand a transfer charge (0.5 to 1.5 per cent) for selling before the project is completed.

If you are depending on an infrastructure development to propel prices up, make sure you have concrete information about the completion timing.

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.