HOMING IN
Outlook Money|November 2020
Low prices, cheap interest, plentiful supply: this may finally be your chance to buy a home. But its foundation must be on wise, careful choices
Vishav

It’s as easy to ask the question as it is for a child to sketch a dream house in her sketchbook, with clouds and a tree next to it. Is this a good time for you to buy your own dream house? The question has been with you for a while. Let’s say you had recently, maybe a year or two ago, at last, reached a point in your life when you could finally afford one—that is, foresee being able to pay out a loan in a stable, predictable manner. Or you are at another phase in life and looking to add some more concrete to your long-term investments. In either case, you were biding your time. So should you go for it? It’s an instinctual question in times such as these: the economy is in a trough, and prices are low. Common sense should tell you this is a buyer’s market. But the fine print of life can always hold surprises, so let’s carefully examine the pros and cons.

First, the reasons to answer with a yes. Housing prices have indeed been on a downward swing, and that trend was on even before the pandemic struck. Data from the Reserve Bank of India (RBI) tells us home prices had declined around 1 per cent during January-March, compared to the previous quarter. Post-COvID, there was a drastic dip, and then a correction that still left prices significantly lower. And reports predict a further fall, though the jury is out on that. Plus, there exist two related facts of direct relevance: one, interest rates too have come down and efforts are being made by RBI to ensure the benefits of rate cuts are passed on to homebuyers; and two, there’s no dearth of unsold inventory. So there’s both choice and capacity for end-users and investors. That should make it a buyer’s market with a good possibility for better price negotiation?

Additionally, one glance at the sellers may tell us they are in some distress. In India, housing has been in a crisis for some time now—the never-before-seen, near-unnatural boom period of the nineties, when prices trebled and quadrupled menacingly, is way behind us. A severe liquidity crunch gave us the spectacle of half-completed projects and unsold inventories. Forlorn, empty towers, some with the scaffolding on for months and years, dotted our urban landscapes. Recall that this was the sector that brought even the US down to its knees with the subprime crisis of 2008; the subsequent global recession washed over all of us. (In a real sense, we are still not out of that slump.) That has meant a decade-long crisis for the realty sector, which further fed into a larger vicious cycle. The challenges it has been grappling with persist despite government intervention: the liquidity crunch never really ebbed, and the unsold property is still lying idle after years. As if that was not enough, the pandemic came, bringing in the real ravages. Everything came to a complete standstill with the lockdown. The laborers went home, construction activity went into a long pause, most new projects are delayed….

Shouldn’t all of this spur you, the first-time buyer or the thoughtful investor, into action? Well, care and caution should be your watchword. It would be folly to think of this season as a distress sale. To begin with, big realtors are among the canniest, most dogged operators with real staying power…they typically wait out a trough without lowering prices. Not to speak of the more unscrupulous players: think back to those scenarios where buyers, famously, had to move courts for justice.

Says Vikram Chari, Founder, and CEO of Smart Owner, “Most buyers face lack of transparency in pricing. Instead of the price being dependent on the unit one chooses, it is a factor of one’s

Festive Offers From Developers And Consultants

With the festive season marketing is gearing up to cash in on the opportunity and overcome the adverse impact of lockdown. The real estate sector is also witnessing lucrative offers, discounts, freebies, and attractive payment schemes: ability to haggle. It is important for the buyer to look for good developers who offer fairness and transparency. A few may also offer a price protection plan, safeguarding the buyer from price fluctuations. This could save the buyer time and energy, knowing that others are getting the same price.”

Any bit of haziness can land you in limbo. Sameer Tikoo, an IT professional, bought a home for his family last year in Greater Noida. Despite buying a ready-to-move-in flat, he recalls, it took almost a year for him to get possession, after a long drawn fight with the builder. He was lucky. Thousands have failed to get possession of their flats years after the committed date of completion. “Thankfully, I had some friends who had bought homes recently. They guided me. Otherwise, it’s really difficult for a first-time buyer,” he agrees.

WHAT TO WATCH OUT FOR?

So what must a first-timer do? Experts say one can minimise risk and get the best deal with due diligence. A couple of key points must always be kept in mind while embarking on this journey, says Chari.

  • Most importantly, if you can, choose a ready-to-move-in home over an under-construction one to avoid cases like that of Amrapali, where buyers are awaiting delivery after over a decade of booking. Ensure the completion and occupation certificates are in place.

  • In all cases, go for a developer reputed for quality construction and timely delivery.

  • Stick to RERA-registered projects. Being under the sanction of the Real Estate (Regulation And Development) Act 2016 will ensure the project is within the jurisdiction of the appropriate state regulatory body.

  • Even so, make sure you read the agreement carefully, focusing on the deliverables and completion timeline.

Besides giving yourself those buffers of safety, carefully evaluate the floor plans to suit your family’s size, and ensure the home is adequate for the future. You must, of course, prioritize a location convenient in terms of proximity to the office, school et al, with good social infrastructure. The pandemic has shown us that facilities like parks, sports arenas, and jogging tracks within the residential complex are crucial. But just their presence is not enough: check their per capita availability so that they can be used well during weekends. According to Manju Yagnik, Vice-Chairperson of Nahar Group, and Vice-President, NAREDCO (Maharashtra), this is the right time to invest in real estate as all the factors are working in favor of the buyer. “Homebuyers can take advantage of stamp duty cuts in some states, and home loan rates are available for as low as 6.9 per cent, with discounts, offers, incentives, and flexible payment plans,” she says. In the last five years, property prices did not fall drastically but remained flattish, says Sudhir Pai, CEO, MagicBricks. “However, COVID brought an immediate price decline of 9 per cent. The price drop improved to 5.2 per cent during the April-June quarter. Adjusted for inflation, this has resulted in a time-factor price correction in residential real estate,” he adds.

The situation, Pai says, has prompted developers to offer easy payment plans like no EMI till possession, reduced down payments (as in a 10:90 plan, where the buyer pays only 10 per cent in advance and 90 per cent during possession), and a refundable deposit in case of cancellations. He advises home buyers to carefully understand the obligations and the terms and conditions of each of such offers. Also, they must try to find out to what juncture the developer will fund the EMIs and under what circumstances would the payment be transferred to the buyer. “Homebuyers must try to find out if they are being charged extra and whether these extra charges are being used to fund the payment plan. It is advisable to opt for ready-to-move-in properties and that too from reputed developers, (or ensure they) intend to complete the project. Homebuyers shouldn’t be lured by a scheme in a project that has low chances of completion,” he explains.

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