By Harvinder Singh Sikka, MD, Sikka Group
The end-user is in the driver’ seat while purchasing property as developers are going all-out to attract the buyers; icing on the cake for residential buyers is the low home loan interest rate
Did you know that challenging times are an opportunity for making money in real estate? This is no joke. And the icing on the cake is favourable market scenario inclined towards the buyers. It only requires structured market analysis to get your returns right and get the best deals as an end-user.
The current situation is challenging as the general perception is about economic turmoil; however, the market is flush with projects, and developers are going all-out to attract the buyers. This is a good opportunity for end-users or long-term buyers to enter the property market. Today, the end-user is in the driver’ seat while purchasing new property recently completed or is nearing completion. There are offers galore in the market where some developers are even offering to pay the interest rate on the loan till the property is ready for possession.
The time could not have been better for the buyers in the residential segment as home loan interest rates are at a 15-year low. All the banks are now offering home loans at an interest rate below 7 per cent, which has considerably brought down the EMIs. Imagine the situation a few years back when a buyer was paying an EMI of around Rs 800-900 per lakh, and now it has come down to around Rs 700 per lakh. The simple calculation is that for a property costing Rs 50 lakh a buyer will get an EMI of Rs 28000 after paying 20 per cent down payment, which was earlier between Rs 32000 and Rs 36000 per month. The EMIs for a middle-class home has come down to a level where they are lesser than the rents of a decent middle-class home in a good location.
In the residential segment, the prices are subdued for quite some time, making it even more lucrative for the buyers. Looking at the current scenario where raw material prices are going northwards, the realtors would soon have to increase the prices. The current pandemic situation has made the developers stay put with the pricing, and this gives the buyer a window that should be utilized at the earliest.
Similarly, commercial segment is extremely beneficial for the investors as market analysis puts the demand for office spaces and malls at an all-time high. Some developers have come up with innovative investment options linked to the pre-leased option. The risk factor of the investors of commercial properties comes down to zero in the case of pre-leased properties. One of the latest investment options is the fractional investment, where an option is given to own a part of the property and divide the earnings accordingly.
After the Budget announcement, where the FM has emphasized infrastructural development, the scope of buying affordable properties in peripheral areas has opened up. Many affordable housing projects are coming away from the city centres, but now with improvement in connectivity, the buyer does not have to worry about commuting. If we talk about Delhi NCR, a lot of opportunities are coming up on Yamuna Expressway, Sohna Road, Dwarka Expressway, Manesar, etc. It is not that affordable homes are always far away from the populated areas as there are lucrative options in areas such as Greater Noida West, Raj Nagar Extension, etc.
If you are buying a property in a far-flung area, please assess the location’s long-term merits. When you start your purchase, it may look like the wilderness. But if you wait for infrastructure to come, the values will not be low. So, assess the infrastructure plans of the area. Developers are normally only too happy to tell you these details. For instance, in the Delhi NCR region, the proposed metro lines are a big draw. Property along metro lines is always good to attract end-users. So, check out the proposed metro plans before you buy. Expressways and bypasses also make a difference to the property rates. If you buy today, it will be two years before you can take possession of the property. If infrastructure comes in then or soon after, your deal is safe.
If you are looking at regular returns from your property investment, it is a good idea to buy even at a marginally higher cost in areas where there are good rental returns. In the last one year, rental returns have risen by up to 15-20 per cent — 5-10 per cent in the last six months alone. If you have a transferable job and are wary of buying in one city from where you may be transferred out, remember rising rental returns are in your favour.
All in all, the real estate market is going to go up very soon, and this is the window that buyers should take advantage of.
