For end-users, festive season is a good time to strike a deal for a house

Prices and interest rates are both low, and attractive discounts and payment plans are available that will sweeten the deal further

For many fence-sitters in the housing market, the festive season could well be the time when they finally take the plunge and strike a deal. Not only is this the most auspicious time for a house purchase, the deals and offers are likely to be the best at this point of time. In the story below, we try to answer some of the top questions that prospective homebuyers would like answered before they set out to buy a house.  

Will prices dip further?

Most experts are of the view that prices have already come down a lot and may not decline further from here. "The chances of prices falling further are minuscule. They have already corrected 15-20 per cent over the past three-four years on account of demonetisation, sluggish market sentiment and inventory overhang. To boost sales, developers are offering discounts in the range of 3-5 per cent. Margins of developers have already turned thin. In my view, prices have bottomed out," says Shalin Raina, managing director (MD)– residential services, Cushman & Wakefield.

In addition to low prices, several other costs that are part of your home purchase, are also at decadal lows currently. "At around 7 per cent, mortgage rates are at an all-time low. Moreover, developers are offering tailored payment plans and freebies, all of which have made house purchase very attractive at this juncture," adds Raina. Sweetening the deal further for buyers in Maharashtra is the reduction in stamp duty.

While it is indeed true that house purchases took a big knock during the lockdown, things are looking up now, as quarterly sales figures from Anarock Property Consultants indicate. In the first quarter of 2020, homes worth Rs 46,306 crore were sold in the top seven cities of the country. The number then dipped badly in the second quarter to Rs 12,694 crore. Thereafter, however, sales rose 2.3 times to Rs 29,731 crore in the third quarter. And they will only improve further during the festive season.

Those who are waiting on the fences expecting better prices or better deals must bear in mind that all these offers come with an expiry date. As soon as the market regains momentum, developers will begin to withdraw them, so prospective buyers need to make the most of these offers while they last.

Should I move to the periphery?

In markets like Bengaluru, there has been a pronounced shift towards peripheral locations. The advantages, of course, are that prices are lower, and hence one can buy a house at a lower cost, or purchase a bigger property. "Besides a bigger house, the motive could be to attain a quieter life with less distractions and pollution, and more greenery. Amidst the pandemic, you may also want to put a safe distance between the inner-city hot zones and your family," says Anuj Puri, chairman, Anarock Property Consultants.

Peripheral locations are no longer the infrastructure-deprived places they were in the past. Says Jayashree Kurup, head of content and advisory, Magicbricks: "In the past decade or so, peripheral localities in many cities have seen a lot of infrastructure development. So, they actually have newer, more modern infrastructure than the more established parts of the city," she says.

However, the decision to move to a peripheral location should be taken after a lot of deliberation. Puri says that those contemplating a shift to the periphery should ensure from their employer that the work from home (WFH) option comes without an expiry date.

Other downsides should also be considered. "Bear in mind that peripheral locations are cheaper because they are still developing and are distant from central areas, which are inevitably the hub of economic activity and social life in a city. If the reduced connection to the city centre is acceptable or even desirable, then moving to a peripheral location makes sense," says Anuj Puri, chairman, Anarock Property Consultants.

Before shifting, make sure that the location has the necessary amenities. "A quality hospital located within 20 minutes driving distance should be a top priority," says Kurup. Puri emphasises that the peripheral locality should be well connected to the city centre by private and public transport. Connectivity via Metro, suburban rail, etc would be a big plus point. Buyers should also check whether schools, shopping and entertainment centres are available. Finally, water and electricity supply should be dependable and the crime rate should be low. "A bigger house in an area that is bereft of any vibrancy or social infrastructure may not turn out to be everything one had hoped for," warns Puri.

Should I buy a bigger apartment?

With the entire family cooped up within a small apartment for more than six months now, there is a strong desire for more space. People who are working from home also want a room that is secluded from family activity. Experts, however, warn that the decision to buy a bigger house should not be taken in a hurry.

One reason why experts are advocating caution is that the work from home phenomenon could well turn out to be temporary. "If you are renting a house, then you may well go for a bigger one. But if you are buying a house, then the primary criterion that should determine its size is how much you can afford," says Ranjit Punja, co-founder, Creditmantri.com. Only people who have large families and can afford a bigger house should go for them. Or you may buy a bigger house because prices have dropped and hence you can afford to buy more space within your budget.

Other experts also emphasise that the decision on the size of the house should be an objective decision and not an emotional one. "Those who will take a loan should ensure that the sum total of all their EMIs does not exceed 40 per cent of their take-on salary," says Nitin Vyakaranam, founder and chief executive officer, ArthaYantra. In the past, people who have exceeded this limit, he says, have got into trouble when their salary was cut or when they saw a drop in their income. Another point he emphasises is that when buying a larger house, people often overlook the fact that it will also carry a higher maintenance cost.

Ready-to-move or under construction?

Another question that many prospective buyers are wrestling with is whether to buy a ready-to-move (RM) property or an under-construction (UC) property. An RM property offers many advantages, which is why it is finding many takers in the current market, which is driven by end users with an immediate need. “After the lockdown, most of the transactions are happening in RM properties in areas well supplied with infrastructure,” attests Pradeep Mishra, head of Sainik Estates, an NCR-based real estate consultancy.  

Buying an RM property reduces the risks involved in house purchase. "There is no risk of delayed possession here. You can immediately move in and start living in that house or can rent it out for a regular income," says Kurup. Another reason why RM properties are preferable is that what you see is what you get. In a UC property, you may have purchased a flat with an area of 2,000 square feet, but when you move in you may find that it has only 1,100 square feet. You can avoid such unpleasant surprises by opting for an RM property. If you go for a UC property, there is also the risk that when the apartment is handed over to you, the surrounding infrastructure may not be ready, forcing you to live in primitive conditions.

Moreover, the price differential between RM properties and UC properties has shrunk. Experts say it could be in the range of 0-25 per cent.

Financial considerations are also involved. If you opt for an under-construction property, you only pay the pre-EMI. "No tax benefit is available on the pre-EMI," says Kurup. Further, she adds, you also save on GST when you buy an RM property.

UC properties should only be preferred by people who have limited resources. Suppose that you go for a scheme where you have to pay the builder 20 per cent at the time of booking and the rest on possession. If your resources have got exhausted after making the down payment, then the two-three-year period during which construction happens will give you time to save up.

One may also opt for a UC property in an upcoming area. If infrastructure is being developed, or a metro link is being provided, then it may be ready by the time you move in.

How should I evaluate festive offers?

Nowadays, owing to low demand, developers give price discounts all round the year. “You can get a discount of 8-10 per cent from most developers anytime. The question is whether you can negotiate for benefits beyond that,” says Ajay Sharma, MD, valuation services, Colliers International India.

As for how to evaluate the various types of offers available, Puri says: “An offer or scheme should be considered valuable only if it adds to the value of the property or reduces the cost of acquisition.” Once a buyer has decided to buy a house of a certain size and in a certain area, it makes sense to go in for the one which comes with an attractive discount, or where stamp duty, registration, parking space, and floor rise are waived, or where an extended EMI holiday or rent-free accommodation is offered until possession. “These are inevitable expenses that come with buying a home. Their waiving results in a lower purchase cost,” adds Puri. To a lesser degree, modular kitchens and appliances like air conditioners may also be considered for the same reason. However, an expensive vacation, a free car or gold coins have nothing to do with the value of the property, and hence should be avoided.

Key points to remember

• Prices have already corrected a lot and may not fall further
• When you combine this with low home loan rates, attractive payment plans, and the discounts/freebies that builders are offering, this is an attractive time to buy
• Many of the offers available today may vanish once the real estate market revives
• The decision to move to a peripheral location should only be made if your company has promised to allow work from home for an infinite period
• Make sure that basic infrastructure – regular electricity and water supply, healthcare, education and entertainment facilities – are available
• The peripheral location should be well connected to the city centre, preferably by a rapid mode of transport, such as the metro or the suburban rail network
• Opt for a bigger home only if you can afford it. The sum total of all your EMIs should not exceed 40 per cent of your take-home salary
• If you can afford it, go for an RM property as what you see is what you get in such purchases