REAL ESTATE OPPORTUNITIES TO WATCH OUT FOR IN INDIAN MARKET

Huge unsold inventory, slower market for real estate are likely to throw up opportunities for Indian consumers.

While there are several dos and don’ts around financial decisions to keep an eye out for, here are three realty opportunities that you should explore.

Transferring your home loan

Ever since the Reserve Bank of India has mandated that pre-payment fees on mortgage loans cannot be levied by banks, switching your home loan has become an attractive option. Hence, refinancing (transferring your loan) could help you in three ways:

• Reduce your EMI outflows in these inflationary times This might just be the boost you needed, especially if your salary hike is less than expected.
• Keep your EMI the same even if you get a lower interest rate This way, the lower rate translates into lower overall interest payments and higher savings.
• You can also increase the EMI but for a shorter loan tenure This also leads to money being saved over the long term, if not immediately.

Use our home loan transfer calculator below to find out which of the above option works for you.

Buying a property under construction

If it’s an under-construction property you are considering, then check you have sufficient ability to absorb a delay in possession. As is often the case, builders delay delivery of their projects. You need to account for this delay, when judging whether the price you are getting is still worth it, even with a 1-2 year delay built-in to your budget.

As the realty sector is swamped with unsold inventory, chances of delays for properties under construction increase with builders looking to offload completed and unsold inventory. The following graphic from news published in LiveMint, illustrates the magnitude of the problem.

Unsold property inventory across major cities in India. Source: LiveMint, 2015

Since buying a property is typically the largest financial decision for retail consumers, prior diligence and sticking with builders whose (reliable) reputation precedes them is a must.

Deciding whether to rent or buy

Think long and hard whether in this market you want to commit to buying a property, as rentals are typically at less than 3% of the property value in most cities. People moving to a new city and knowing they are going to be there only for a few years, should rent.

On the other hand, if you can land a good purchase price and see yourself living in this property for the next 7-10 years, then 2015 might be a great year to buy a house. But be warned, it could take around 8-10 years too, for this property to appreciate meaningfully, at the current property rates.

Source: Buy vs Rent calculator on BigDecisions

With property purchases slowing down across the country (see the graphic below), there is a possibility of prices stabilising which may present an opportunity to buyers.

Absorption numbers (no. of units sold) for property in major cities in India, Source: PropEquity

Since buying a home is an emotional decision as much as a financial one, a one-size-fits-all solution doesn’t exist. People moving to a new city for a shorter span should rent. However, if you see yourself living in the property for 7-10 years, then buying is a good option.

This article is based on the points discussed by me on the Property Show on NDTV.