Good time to scout for property After waiting for almost three years, information technoogy professional Kunal Bhat has finally decided to take the plunge and buy a property in Thane. For the past couple of years, it was very tough. There were token salary increases. Worse, there was fear of job losses. The overall uncertainty made it almost impossible to take a call, he says. Things are beginning to change because there is less talk of job losses and if things do look up, even salaries might improve by next year. He also anticipates better job opportunities. Importantly, he believes with the stock market showing signs of improvement, the realty market will also start rising soon. Typically, the realty market follows the stock market with a lag of six months to a year. Before it happens, he wants to strike the deal. Financial planner Gaurav Mashruwala has also been pushing some of his clients towards property, as he believes realty is still a laggard. It would be a wise thing to start looking at and identifying properties because the timing is quite right, he says. Some traction already seems to be there, if one goes by property consultants and bankers. Says Om Ahuja, chief executive officer of residential property, Jones LangLasalle: With the number of closures in property deals rising, builders are already beginning to withdraw some of their attractive schemes, like 80:20. Ahuja says except the Delhi-National Capital Region, not seeing much traction because of the negative vibes in the area due to legal problems being faced by buyers in the Supertech case, other areas in metros are seeing a lot of action. And with slightly over a month to go before the festival season starts, this could be a good time to start scouting. Typically, there is little property buying between May and September because of the monsoon. There is also Pitr Paksh (September 9-23), considered inauspicious for buying property. After that, the home buying season starts in full swing and goes on till the end of the financial year. Why now? The festival season would allow buyers to get freebies and discounts which could be quite useful for a first-time buyer who wants to stay in the residence, adds Mashruwala. There were freebies and discounts even in the past few years but a potential buyer lacked the confidence due to tough economic conditions. With the stock markets beginning to move up and overall change in sentiment, the overall mood is better. The good news is that this rise in confidence is yet to trickle down to property prices. At least, till now. Till early this year, buyers were being offered discounts of 10-20 per cent. Many are still offering discounts. But this will start coming down, say bankers. If the property is being bought in an oversupplied area, there will be more discounts and less in undersupplied areas. But smart buyers will get good deals because there are also many investors who have held on to properties for a long time and they want to exit. There is some institutional pressure from investors and lenders as well, says a manager in a housing finance company. For property investors, Mashruwala advises them not look for freebies such as free furniture or kitchen. Instead, try and negotiate a good discount. Lower EMI burden soon Two key things favour a property buyer. One, it is unlikely that the Reserve Bank of India (RBI) will raise rates in the near future. Two, it having recently allowed banks to raise long-term capital for funding priority sector housing without keeping the mandatory cash reserve ratio and statutory liquidity ratio. In its recent policy review, RBI decided not to start a rate cutting process and might not do so in FY15. But the good news is that rate cuts arent far away as well. Says a report from Religare Securities: RBIs rigid stance on containing inflationary expectations means there is little scope of easing, at least in 2014. As such, we expect rates to remain elevated for now, with a 25 basis points (bps) cut unlikely to materialise before the years fourth quarter. Most banks and housing finance companies are charging 10-11 per cent on home loans. If rates were to soften by mid-2015, the equated monthly instalments (EMIs) would come down. For example, if you take a 20-year loan of Rs 70 lakh now, the EMI will be Rs 68,715. If the rate goes down by 50 bps after one year, the EMI would come down to Rs 67,500. In addition, to encourage affordable housing, RBI has exempted long-term bonds from mandatory regulatory norms like the cash reserve ratio (the minimum fraction of total deposits that commercial banks have to hold either in cash or park with RBI) and statutory liquidity ratio (the amount commercial banks must maintain as gold or approved securities before lending). Freed of these two requirements, banks would be able to provide cheaper loans to customers. RBI has also redefined priority sector lending for housing as loans up to Rs 50 lakh to individuals for houses costing up to Rs 65 lakh in the six metropolitan centres- Mumbai, New Delhi, Chennai, Kolkata, Bangalore and Hyderabad. For other areas, it covers loans of Rs 40 lakh for houses with values up to Rs 50 lakh. While these moves wont have an immediate impact as banks will take time to raise bonds to lend, if funding from these bonds brings down rates, the borrower can always shift. For, there is no prepayment penalty on floating loans any more. Source: Business Standard
Posted on: Mon, 11 Aug 2014 09:53:45 +0000
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