“Don’t wait to buy real estate, buy real estate and wait.” – Will Rogers

With the entire world hit by Covid19 pandemic and future being uncertain, real estate market activities are also at a standstill. Even those who were looking to buy a home towards the end of 2019 or start of 2020, are now slightly hesitant to take the next step.

The obvious questions in the mind of our clients – Will the property prices correct drastically? I believe market will revive sooner than the general consensus that has been building up. Read our earlier article - 3 Reasons Why Housing Market May Revive)

Should you buy a home now during this pandemic? Let me attempt to answer this.

In my views, if your financial position gives you confidence to buy a home (Read our earlier article- First, Check Your Financial Health), then the following five factors will make it a compelling case to buy a property now.

Lower Interest Rates

With successive repo rate cuts by RBI, repo rate now stands at 4%, it’s lowest in over two decades. Home loan rates are linked to this repo rate. So, lower repo Rate ultimately culminates into lower home loan rates. For instance, SBI is now giving home loan at the rate of 7.5-7.8% as against 8.2-8.55% at the end of 2019.

Partially a Buyer’s Market

Real estate industry is gripped with supply shock, demand shock and liquidity shock all at the same time. Given the rough patch that most of the developers are going through, and the quantum of both ready and under-construction inventories they have, they may be more willing to give attractive deals and flexible payment options.

Recent Cut in Stamp Duty

Maharashtra government had recently cut stamp duty by 1% (reduced it from 6% to 5% of the agreement value). This has reduced the transaction cost by 1%.

History Shows Real Estate Recovers Ahead of the Economy

Out of experience we have seen that housing market recovers before the economy does. With Unlock 1 underway, economic activities are gradually re-starting. However, no one can really time the market. So, if you want to buy a house, then it is advisable to do it before the advantage of current negative sentiments wane away.

Proven Investment Mantra

Investment gurus have always said that it is wise to “Be fearful when others are greedy and greedy when others are fearful.”

To add to the above, it is worth noting that real estate has always been an attractive asset class to stay invested in over long term. To understand what makes me say so, read our article- 7 Reasons Why Real Estate Is The Best Long Term Investment.

Due to the long-term vision with which property investment should be done, timing the market becomes less relevant. Bright future prospect is currently overshadowed by the short-term fear created by Covid19 pandemic. But remember, this too shall pass.

Having said these, I reiterate that investment in real estate needs a lot of research and understanding, mainly because of three reasons-

1. It involves huge quantum of investment- mostly one’s life savings
2. It is not a very liquid asset – unlike equities, you cannot sell it the day you want
3. Transaction cost involved in a real estate deal is very high ranging from 7-9% of the agreement value.

So, it is important to get it right. An expert advisor can ensure help you get it right J

Trust us. Allow us to guide you in this journey.

Neha Agrawal - Co-Founder, OPENMINDS

nehaagrawal@openminds.co.in | +91 9820402693 | www.openminds.co.in

Where Else to Find Us - Facebook | YouTube | LinkedIn | Instagram | Twitter 

“Owning a home is a keystone of wealth.. both financial affluence and emotional security” – Suze Orman

Being amidst Covid19 pandemic, are you one amongst the many who are contemplating whether this is the right time to buy a house? If so, then do read on.

Although housing market outlook does not seem to be very conducive now, I still feel market will see a revival sooner than what general market is expecting as of now (Read my article- 3 Reason Why Housing Market May Revive)

Having said that, real estate should always be bought with a long-term perspective. Having a long-term investment horizon makes ‘timing the market’ little less important. But there is one very important factor to be considered and evaluated before you decide to purchase a property- Your Financial Health.

Your Financial Health

Take out time to reflect on the following questions. Although it is good to have a positive approach, I would urge you to be a little conservative in your analysis, esp. in the current times as we are amidst a pandemic.

1. Assess your current finances

• How much savings you already have?

Any property purchase would require minimum 20% self-funding (down payment). Further, you would also need to ensure you have some contingency reserve or emergency fund to manage any unforeseen circumstances. Depending upon your nature of income you may like to maintain anywhere between 6-8 months expenses as a reserve. Do not forget to consider your home loan EMI as a regular expense going ahead.

• How much money you are able to save annually?

This is very important. Knowing the usual surplus left in your hand annually after meeting your expenditures will help you arrive at your loan servicing capacity. Do consider any additional expenses and additional savings arising from the changed scenarios. Eg. If you have started working from home, then you would be saving on travel costs or office rent, etc.

2. Estimate the stability of your future income stream

• How secure is your income (salary / profits)?

• What is the growth prospect of your income in the near future?

In the current scenario of weakening economic sentiments, bleak business prospects and downsizing, it is very important to re-assess your financial stability. Be conservative in assessing your future growth prospects.

3. Gauge how much loan you can get

• Check your Credit Score

You can goto the website of CIBIL to check your Credit Score and report for free. It reflects your credit worthiness and shows your loan servicing and repayment behaviour and track record. This score ranges from 300-900, the higher the better. Generally, a score above 750 is considered to be very good. All banks and NBFCs will look at it before deciding your loan sanction amount.

Refer to this link to check your score now - https://www.cibil.com/freecibilscore

If your CIBIL score is low and you want to avail handsome amount of home loan, then you may want to wait for a while and try to improve your score by paying off some debt, servicing loan EMIs timely, not availing too much credit, paying credit card bills on time, etc. With responsible credit behaviour, the score will improve overtime.

• Check your loan eligibility

Approach a bank to check your loan eligibility. This is a very important step as it will help you to estimate your house purchase budget as well.

If your answers to the above questions indicate that you can afford to buy a home now, then, in my view, the current macro-economic and market factors makes it a compelling case to buy a property without any hesitation.

To understand what macro-economic and market factors I am referring to read my article- Should One Buy A Home In Pandemic.

However, given the sheer quantum of money that goes into buying a house, it calls for a lot of research and understanding before you put your hard earned money on the table. We will be happy to guide you in taking the right decision.

Trust us. Allow us to guide you to your home :)

We can help you without physically connecting. We can help you with-

• Expert opinion
• Evaluating various projects that may match your needs through 
• Telephonic conversations
• Power Point presentations stating factual details and pros and cons
• Virtual Tours of the properties
• Online meeting with the concerned parties for a better understanding

Neha Agrawal - Co-Founder, OPENMINDS

nehaagrawal@openminds.co.in | +91 9820402693 | www.openminds.co.in

Where Else to Find Us - Facebook | YouTube | LinkedIn | Instagram | Twitter 

We surely are in uncertain times. The sudden outbreak of Covid-19 has caught us unaware. Mostly, for all of us, this is the first ever pandemic we are experiencing in our lifetime. Hope so, this is the last one too.

This pandemic suddenly brought most of the economic activities to a standstill and impacted most of the industries, including real estate. Property market activities have almost come to a complete halt- construction activities have completely stopped, buyers are holding back their purchase in anticipation of a price correction and sellers are waiting for sentiments to improve.

With the country now going through Unlock 1 and economic activities gradually restarting, let us see how the market dynamic plays itself out. We foresee some changes in the market which will have impact on the way the industry functions going ahead (Read our earlier article- Changing Trends In Real Estate).

Although nobody can really forecast the future with certainty, but over a decade of experience of housing market in Mumbai makes us strongly feel that housing market may not fall to the extent everyone is expecting and it shall see a revival soon, ahead of the overall economic revival.

What makes us say that the housing market may revive sooner than anticipated?

If 2008 global recession and any of the previous global disruptions are studied, you will see that property market has always revived ahead of the overall economy. In fact, prices have made their new highs in some cases.  This, coupled with the below three factors, makes us feel that housing market will revive sooner than currently been anticipated.

1. Demand from First Time Home Buyers - Importance of Home Ownership

This pandemic has given one message loud and clear - YOUR HOME IS THE SAFEST PLACE TO BE IN.

As it is, real estate has always been a very important asset class, but the need to own one must have got deeply rooted in the mind of the end users now. This is one of the most important factors that may lead to the revival of the housing market.

We may see many first time home buyers entering the market now. Given the impact that the concept of social distancing is going to have in our minds for time to come, we may see many dwellers of co-living shared spaces now going in for independent homes.

Although this stands true for all markets, it has higher implications for Mumbai housing market because of one unique factor. As per 2011 census, a whopping 43.02% of Mumbai population consists of migrants. This also explains the continuous demand for rental units in the city.

Although the current pandemic has led to large scale reverse migration, it’s worth noting that the social strata which has witnessed this reversal is not too relevant if we want to look at the expected demand for real estate. The segment of migrants that are the target audience for housing market and that may push up demand, still broadly remains here– professionals, business owners, entrepreneurs, salaried individuals working in the corporate sector.

2. Increased Thrust on Work-From-Home (WFH)

Another important factor is the increased thrust on work-from-home. WFH will become a norm in many white collared jobs, esp. IT industry and many service sector firms. WFH, if followed with discipline and commitment, can lead to substantial cost savings for both the employers and the employees, be more convenient for the employees, enhance productivity and lead to a better work-life balance. More so, in Mumbai, where an individual spends anywhere between 2-4 hours on an average commuting to-and-fro work place, WFH will be a boon.

WFH would raise the need of having a dedicated work space in your home, thereby spurring demand even from existing home owners who may now need a bigger home than what they already have.

3. Housing is one of the Basic Needs

Everything said and done, housing is ultimately one of the basic needs of mankind and structurally, demand in India and, more so, Mumbai will remain due to strong demographic fundamentals.

In India, the mortgage to GDP ratio is still very low (around 10%). This coupled with factors like favourable demographics, rising nuclear family culture, easy availability of finances, overall improved affordability, social distancing & work-from-home mindset post the current pandemic, etc. indicate that structural demand for housing will remain high in India.

Bright future prospect is currently overshadowed by the short-term fear created by Covid-19 pandemic. But remember, this too shall pass.

It is difficult to predict the future with certainty, but given the above factors and general benefits of investing in real estate over long term, I somehow still get sound sleep at night knowing that my investment portfolio is heavily skewed towards this asset class.

If the above arguments sound logical and you are wondering whether you should consider buying a home now, then do read - Should One Buy A Home During Pandemic?

Neha Agrawal - Co-Founder, OPENMINDS

nehaagrawal@openminds.co.in | +91 9820402693 | www.openminds.co.in

Where Else to Find Us - Facebook | YouTube | LinkedIn | Instagram | Twitter