“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-
- It involves huge quantum of investment- mostly one’s life savings
- It is not a very liquid asset – unlike equities, you cannot sell it the day you want
- 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
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