What's in store?

Home buyers are asking themselves if this is the right time to buy a house. They are also concerned about the property scenario and wonder how it unfolds. Though interest rates may be on upward swing, it seems that the property market, after an almost two-year-long struggle, is moving towards gradual consolidation.

It is expected that it will gain a comfortable foothold in the coming financial year, if not take a big leap. It seems the times are changing for the real estate industry, but it has to brave many challenges in the time to come. There is no denying that  the industry has matured owing to the slowdown of the past two years. The struggle has made those associated with the industry stronger and wiser, even customers.

Even as customers seem to be caught in a dilemma, they utilised this period to research various aspects related to home purchase; be it identification of property, tracking property prices or interest rates offered by banks and lenders.

Now that the scenario seems to be brightening, and customers are equipped (knowledge wise), home buying activity may witness some traction. Some other factors like rational pricing, good discounts, timely deliveries and availability of quality flats may push property sales.

Affordable housing, it seems, will be the flavour of the season and the segment will see expansion not only in metros like Mumbai, tier I and tier II cities but also in many smaller cities.  

Commenting on property prices which are a major concern for home aspirants, the CEO of Usha Breco Realty Uday Dharmadhikari says, “Due to rising input cost, it is difficult to predict property prices for the next couple of months. However, there will be a softening of property prices in the market and the factors affecting the same are affordability, extent of housing loans, reduction in the raw material prices and over supply in certain segments. But the outlook for 2011 would generally be positive and the residential segment will continue to be in demand particularly, affordable housing.”   
Bienu Vaghela

“The RBI has raised a pertinent point in relation to inflated valuation of real estate properties, where steps are much needed to address this long standing issue. As a follow-up to the directive issued by the apex bank in 2007, it has rightly indicated that accurate and realistic valuations are essential for stability within property markets and there must be a policy for property valuation in place.

This is an aspect that has also been reiterated by the Securities and Exchange Board of India (SEBI), which on numerous occasions has highlighted the issue of incorrect property valuations as having a detrimental effect on the economy at large. Taking cognisance of these existing challenges, RICS India has taken the initiative to develop valuation standards of global application along with India-specific guidance.

These valuation standards as laid out in the ‘Red Book’ are globally consistent and locally relevant and can be mandated by different stakeholders and regulators. To this end, adherence and adoption of such standards will ensure that the current flexibility of valuers to ‘tweak’ assumptions to under/over value a property will be restricted and will further help in eliminating existing arbitrations in valuation practice across the country.
Sachin Sandhir, MD & Country Head, RICS India

The CEO of apnapaisa, Harsh Roongta says, “As far as the real estate industry goes, there is need for a common regulator as the industry has been reeling under want of several permissions at multifarious places, huge input costs, deliberate loose rules in zoning and FSI etc. which is promoting rent seeking. There is a need for clear cut rules and procedures, moreover there is a need to provide better access to bank financing.”   
Need for a regulatory body

Supporting the view, Amit Goenka, National Director – Capital Transactions, Knight Frank India says, “A regulatory body is absolutely important for the sector as it will certainly help developers and consumers alike. Last year, some move in the direction was taken by the Ministry of Housing and Urban Development, but it did not make a headway as it is a very state-specific subject like GST and VAT. Therefore, it is difficult for the Union ministry to implement it. Unless all states come together for the cause, it will not be possible to implement it. Till then things will remain painful for developers as well as consumers.” 

Industry watchers feel that the time is always ripe for first time buyers. The mantra is bargain and bargain some more especially if they are planning to make their buy, a home. Says Dharmadhikari, “If you need a home, you should go ahead with buying plans, identify a suitable property matching your budget, and negotiate the best price with the developer. Holding your plan till winter may not yield desired results. Still customers should go ahead and opt for home loans, if they need the house today and if you have paying capacity for the foreseeable future.” 

“Home loan interest rates will inch up a bit in the coming quarters, whereas property rates will cool off as there has been a too steep an increase in the last two years. In such a scenario customers should identify the property and make a near ‘unreasonable’ offer to the builder which may not be acceptable to him now, but he will come back in few months time,” adds Roongta. 

As far as the outlook for the year 2011-12 is concerned, Goenka says, “The outlook is very bearish for a major part of the year. It will start improving only in the last quarter of the financial year. Also on the back of low supply, the valuations have risen beyond expectations, or have peaked, rather. As the interest rates have gone up, the net investment surplus of the consumer has gone down and home budgets have gone up.

This makes most of the homes out of reach for customers , especially in Mumbai. Also there has been erosion of confidence in the ability of the developer to deliver in time.” Everyone needs a home loan to build or purchase a house and sooner, the better.

People who construct or purchase a home early in their life get longer loan tenure and get sufficient time for accumulating money for their expenses in the later stage of their life like children’s education, marriage etc. But it is important that you work out some calculations around your requirements like the loan amount you are eligible for.

For this calculation you can visit price comparison engines which will enable you to know the amount you are eligible for. Banks have different ways to calculate loan eligibility. If loan eligibility based on your income is likely to be an issue, then talk to several banks to find out which bank can give you the maximum amount. 

For home loan aspirants, Roongta advises, “Customers should shortlist four or five banks and get the shortlisted banks to compete for their loan. The cost of the loan depends a lot on one’s ability to negotiate. Remember that all terms and conditions of a housing loan are negotiable. Interest rates offered by banks take your income and repayment profile into consideration, apart from, of course, your negotiation skills. Apart from interest rates, also check various charges like processing fees, pre-payment charges, legal fees, valuation fees and other hidden costs.”  

Moreover you should also know the down payment you will be required to pay as this is a safeguard against the scenario. In case the value of the house goes down in future, your down payment ensures that the bank's interest is protected by ensuring that outstanding loan amount is less than the saleable value of the property. Once you decide on your dream property, the bank will get the cost of the property evaluated by its own personnel. 

If you take a home loan then you are entitled to tax benefits on the interest and principal repaid to the HFC or bank. “There has been a lack of demand so it is important to cut prices to bring back the demand. This especially applies to Mumbai, Gurgaon and to some extent Pune but not to other cities. There is no evidence of great price reduction except for certain areas with  high end properties where people are willing to climb down on prices. Moreover the offers should be enticing enough for customers to buy,” concludes Goenka. 

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