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Buying a Home - Now or Later?
Friday, June 22, 2007

Prospective home buyers are a confused lot these days - while the media reports a property slowdown, the ground realities are quite different. Real estate agents and developers are holding on to six month old rates, brushing off interjections on falling prices.

To complicate matters further, rentals of residential and commercial properties in India have gone up in some pockets of the real estate market. Genuine buyers are wondering whether they should brave the hiked interest rates and go ahead with booking apartments of their choice, or wait for interest rates and property prices to come down further.

Rumors are afoot that developers are offering discounts in the form of free offers on parking, insurance, and are even prepared to bear the brunt of the interest on the housing loans that buyers are going in for.

Developers in the NCR region are offering to pay 50 to 60% of the EMI on home loans till the property is fully constructed and ready for possession. Some builders in Mumbai are willing to forgo the premium on preferred locations in the residential complex, and, in some cases, even bear the stamp duty! Desperate builders have even gone to the extent of selling through agents at prices substantially lower than their official rates.

This should spell good times for buyers, especially as the RBI is not expected to raise the interest rates any further, according to industry watchers. A section of experts expects a further drop in property prices across India, by as much as 15 to 20% in the next few months.

Real estate consultants in Navi Mumbai recommend prospective clients to prolong their wait by six months, by which time prices would fall further by 15 to 25%. Similarly, in the NCR, prices are expected to dive by 10% in the next two months.

Established builders like Unitech and DLF, however, are not succumbing to market pressures. Restructuring its strategies, Unitech plans to shift from high-end apartments to mid-priced compact apartments which meet the budgets of nuclear families.

The company is concentrating on budgets of Rs.70 to 80 lakh which would make the market far more accessible for the mid-range buyer. Senior officials of the ICICI Bank have made observations on the real estate market in India and are of the view that the demand for homes is genuine, as most buyers are first time buyers.

The slowdown, they insist, is a result of the interest rates which is a temporary deterrent. In contrast to the HDFC Bank's prediction that interest rates on housing loans may go up further, ICICI Bank avers that rates would remain stable as inflation comes under control and foreign investment in Indian real estate gets screened.

Putting the rise in real estate prices in India between 2005 and 2006 in perspective, real estate experts support the ICICI Bank's view that the situation cannot be likened to a "bubble" state.The demand for property is very genuine, coming from rising family incomes.

The demand for office spaces in all metros and upcoming cities far outstrips supply and the growing outsourcing business will foster more demand in the future. Growing commerce is further stimulating the hospitality industry in India which is already forging new deals and tie-ups with established global brands in the field.

Similarly, the retail industry is a poised for a major leap, and real estate developers are hard pressed to meet their targets for these high-value customers.A land crunch would necessitate a spiraling of prices, say the experts, so the price appreciation cannot be interpreted as a bubble. So, if the prevailing interest rates are here to stay and a price fall cannot be predicted for sure, a genuine buyer can definitely negotiate a good deal at this point of time.


Related Reading

HDFC Home Loans from Citigroup
Home Loans for NRIs: An Overview

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