Real estate “Modi-fied” – Best time to buy a property
is NOW
Real estate “Modi-fied” – Best time
to buy a property is NOW
India’s fight against black money,
corruption and terrorism just got very real. In what many consider to be a
rather bold move, Prime Minister Narendra Modi on November 8th announced that
the INR 500 and INR 1000 notes will no longer be legal tenders. Modi has said
that these notes will be replaced with newly minted INR 500 and INR 2000 notes.
This move has far reaching implications for many sectors including real estate
which has been going through a somewhat uninspiring phase in the recent times.
It is expected that the segments of
the property market which have a high proportion of cash transactions will be
hit hard- viz the secondary property market, luxury home sales and land
transactions. The range of cash component used in these segments is anywhere between
15-40%. One can expect to see a price correction triggered by stagnation of
sales as the stock of unaccounted money which lubricates these markets has been
sucked out.
Even though many are predicting
negative market sentiments for the realty sector there is a silver lining for buyers who are financing their
property purchase via means of accounted money and home loans. Here are the top
5 reasons why salaried property seekers should invest in a property today:
1) It is a buyers’ market for the
next three to four months: Till the market stabilises many builders would be in
need of cash flow and buyers would definitely have an upper hand in negotiating
the best deals in the primary property market.
2) Higher costs due to RERA : With
the implementation of RERA (Real Estate Regulatory Act) the property prices are
likely to see an upward spiral. The RERA requires developers to be transparent
about the source and use of funds for a project, and the higher cost of
complying with the regulation is unlikely to be absorbed by the builder. So the
next few months will be the ideal buying window for buyers.
3) Impact of GST : Post the
implementation of the Goods and Services Tax (GST) most of the input items for
real estate construction like cement would fall in the 18% bracket which is
much lower than the current 30 40% tax bracket. So the overall construction
cost for a developer is likely to fall. But, looking at the current scenario with
the decrease in profit margins for developers due to RERA and the expected
construction delays due to demonetisation many developers might not pass on
this benefit to buyers.
4) Buyers would be spoilt for choice
in the secondary market: Until last week, most sellers of resale properties had
an incentive to seek out buyers who were willing to transact with unaccounted
money. So much so that there was a preference for such buyers, effectively
eliminating most of the resale properties from the reach of salaried buyers who
finance their purchase via their savings and home loans. Given the
demonetisation, the incentive to sell through cash dominant transactions is
less which opens up a whole new supply of bargain deals in the resale market.
In addition to the wider choice, it gives an upper hand to property buyers to
crack the best deal.
5) Interest rates are set to go down
further: Demonetisation brings with it a deflationary effect on the economy,
and you can expect interest rates to go down further in the short run. The
banks will have more liquidity at their disposal due to higher deposits coming
into the banking channel. Both are likely to trigger a push into home loan
lending via cheaper loans and better credit terms.
If you are looking to buy a home, and
are looking to finance your purchase through a loan, there can’t be a better
time than now!
Happy Investing
Source:Moneycontrol.com
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