The Real estate industry of India was adversely affected by the Covid-19 pandemic, just like the other sectors of the economy. Over the last month, numerous banks and housing finance companies (HFCs) have declared cuts in their home loan rates
While it is an indication of high liquidity and lower interest rates in the economy, the reduction in the interest rates also means that there is an increasing demand for new home loans, and no HFC or bank wants to miss out on that. Industry experts feel expected home buyers may find this time suitable, given the builders’ discounts and low-interest rates in the economy
Why are the demands rising suddenly?
Demand for housing surged sharply in the two quarters between October 2020 and March 2021, following the first wave of Covid-19. It was backed by factors such as a decrease in stamp duty by several state governments, concessions offered by developers, and low-interest rates.
The speed slowed down in the quarter ended June 2021, following the second wave of Covid-19. But the pace has picked up again over the last couple of months, with the broader opening up of the economy, growth in the rate of vaccination, and progress in economic activity
A superior official with a leading housing finance company said Covid-19 had been a significant driver of housing demand because people realized they require more space in the house for education, work from home, and quarantine, among other reasons
“While many who were comfortable living on rented flats or houses, now feel the extreme need for their own space following the Covid pandemic. There are many families who are now searching for a bigger house following the space requirements of kids attending their online classes and work from home. It has been studies that, in urban areas, a large number of people have felt the requirement for a bigger house and those who can, are going for a house with some more space,” he said
Industry professionals say that with work from home becoming the new normal for many employees across IT and other service sectors, several individuals are now looking to buy a larger apartment or house even if it is far away from their workplace or central district area.
The rise in demand over the last year has resulted in a price hike in certain cities. The Residex, the housing price index updated every quarter by the National Housing Bank, increased in Delhi from 91 in December 2020 to 95 in March 2021. In Noida, the figures rose from 104 to 108, and in Bengaluru, from 116 to 118. While it sank in Mumbai from 106 to 105, it bounced in Navi Mumbai from 107 to 118.
Are the prices going to hike?
Experts and industry professionals believe prices will not rise in a hurry as developers are looking at advancing sales to improve their cash flow, inventory levels are high, and a fresh supply is coming in, although at a slower speed.
“While the all-India average inventory at the end of March 2021 had fallen down to 42 months, it has now climbed up to 48 months (following the decline in sales after the second wave of Covid) and there are approximately 12.5 lakh unsold units across 60 cities. This is way too high, and the demand has shifted to ready inventory,” stated Mr. Pankaj Kapoor, MD, and founder, Liases Foras Real Estate Rating and Research Pvt Ltd Company.
An official with the HFC has also said, “nobody is expecting property prices to shoot up” as there is sufficient supply in the market. Even if there is demand, he believes that supply wouldn’t be an issue as “use of new technologies can bring supplies faster.” However, he added that there could be a 10-15 percent increase in prices as commodity prices are soaring, and the labor cost has also gone up following the movement of workers back to their home states.
Should you buy your dream house now?
If you have been saving your earnings to buy your dream home, this is not the wrong time. Mr. Kapoor assured that it is a “buyers’ market” as there is enough supply, and even the developer is looking to expand marketing and sales to revamp the cash flows. Also, at the same time, the interest rates are attractive.
Apart from a lower EMI, a more significant advantage is that a lower interest rate increases a customer’s eligibility. Let’s say if a person is eligible for a loan for which the EMI should be up to Rs 50,000; then, if at an interest rate of 8 percent, they can take a loan of Rs 60 lakh, at a lower rate of 6.7 percent, the loan amount can go up to Rs 66 lakh
Industry experts say developers are under stress as construction activity dropped by around 40 percent because of Covid-19. “It is a wonderful time to buy, but homebuyers must go for finished or ready-made projects. If the builders are under stress, they are compelled to give attractive discounts to increase the quantity and then it is a buyers’ market,” assured Mr. Kapoor.
It makes complete sense to buy a house for your use, but not as much to buy a house for investment. Prices may not rise quickly, given the high inventory levels and fresh inventory coming in
https://www.inventiva.co.in/trends/simlai/real-estate-booming/
