Is the time right for property investment?

[] With numerous policy changes being unveiled in the recent past, is this a good time to buy property? We bring to you the pros and cons, to help you make a decision

The year 2016 witnessed several policy changes that have changed the course of the real estate industry. While these policies have laid a strong foundation for the future of Indian real estate, the short-term implications are not very favourable, believe realty experts. Today, the market is such that buying a property can be both, advantageous and disadvantageous.

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Pros of buying a property now

Slowdown/price correction: The last three years have been a difficult period for the residential sector, with poor absorption rates, virtually no capital appreciation and financial stress on a large number of developers. Price correction is one of the largely documented effects of demonetisation, which may impact the secondary real estate market and keep the primary market stagnant for a couple of quarters. “Over the last few years, project prices have not witnessed steadfast growth. Growth has been rather subdued and hovering around inflation and this has not been very conducive for developers. However, for buyers, it is a good time to acquire property and save,” says Pankaj Ojha, CMO, SPR Group.

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Demonetisation: The effects of demonetisation are a long way from over and a sense of normalcy is yet to return, with respect to the liquidity situation. “Transactions are not taking place and hence, for potential buyers, this is possibly the best time to buy a home,” says Rohit Poddar, managing director, Poddar Housing and Development Ltd. Post demonetisation, the bargaining power of customer has only increased, as the gap between the actual transaction rate and the prescribed circle rate, has reduced. Additionally, the reduction in home loan interest rates, will definitely benefit potential buyers.

Real Estate Regulation and Development Act 2016 (RERA) and the Benami Transactions Act: The government’s aim, through the Real Estate Regulatory Act and the Benami Transactions Act, is to build an organised real estate sector in the country. The implementation of RERA will empower consumers, by imposing heavy fines for delays in projects. “This move will ensure transparency and the accountability of builders in the market will also increase. It will boost the confidence of buyers and in turn, help the industry to attain sustainable growth,” says Anil Jindal, CMD, SRS Real Estate.

Cons of investing in real estate now

Investor-unfriendly investment: For an investor, a real estate investment may not offer the best returns over the next three to five years, due to the curb on black money and other measures announced by the government. “The impact is likely to be significant in commercial sales and other pockets in the secondary market that are largely driven by business communities and investors, rather than end-users who prefer to deploy excess cash in buying apartments or land,” explains Ojha.

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No respite for the resale market: With demonetisation affecting liquidity, there has been a sharp drop in the number of deals. The resale market has been worst hit, with rates falling by almost 40%, in some places, say experts. So, for a genuine home buyer with a requirement to sell his existing property and buy a new one, it may be very difficult to do two deals simultaneously, amid the uncertainty. This scenario can also lead to distress sales, in some cases.

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Nevertheless, despite the present uncertainty, the hope is that the Indian real estate sector will emerge stronger, healthier and capable of sustained growth, in the long-term.

Short-term outlook for the property market

  • Overall real estate transactions and demand for new residential properties are likely to remain low till the end of this financial year, due to negative market sentiments and perceived uncertainty.
  • For a genuine home buyer, with a requirement to sell his existing property and buy a new one, it may be very difficult to do two deals simultaneously, amid the uncertainty.

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Category: Lifestyle

Debora Berti

Università degli Studi di Firenze, IT

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