are you ready to be a homeowner?
think about life before the pandemic. people working in big urban centres like Mumbai, Delhi, and Bengaluru would stay close to work to cut down on commute time. what they saved in time, they paid for in money because rents in commercial hubs are higher. but the pandemic changed this; people could do their job in Pune for a company headquartered in Mumbai.
this, along with cheaper real estate away from urban centres, allowed many to step out of renting and move into owning apartments. in fact, according to a report, people bought more high area apartments in Q1 2021 than Q1 2020. there is more to this than just work from home.
home loan interest rates are the lowest they have been in 15 years. the RBI has kept the repo rate low and unchanged. this means that banks are able to borrow from the central bank for cheap, and therefore provide loans at a lower rate of interest.
India has seen over 1.4 crore new investors over the past year, which has also witnessed a bull run on the stock markets. this led to increased liquidity and household savings.
there are two things that happened due to the pandemic.
last year, when offices were closed, many people had returned to their hometowns to save on the costs of living in a big city. now, a majority of organisations ranging from Google, Microsoft to TCS are considering continuing with a hybrid model of remote and in-office working. there will be many more permanently remote positions than before.
this means people are happier to move further away from financial centres, even permanently. this opens up access to properties that wouldn't have been ideal before. real estate sales in Tier II cities are on the up. the cities themselves are seeing development in the form of rising urban-centric ways to attract more buyers.
the trend, however, was set before the pandemic. in the US, for example, even before the lockdowns, the older generation over the age of 50 was looking to sell over 20 million homes. this means, in a distressed market, younger people found interesting bargains. some of these bargains are now available in India as well. in the NCR market, for example, 85% of homebuyers in the nine months between July 2020 and March 2021 were first-timers. meanwhile, India’s richest are eyeing the likes of Dubai, London, and New York to buy a home.
the timing is great, but buying a house is a long term decision. a recent survey of close to 1,500 home owners in the US showed that 64% of millennials had regrets over buying their current home. very little of it had to do with owning the home itself, but instead concerned many variables that come attached with home ownership. it’s important to take them into account before making a decision.
one of the biggest regrets expressed in the survey was choosing a bad location. In the Indian context, buying a home in the suburbs or Tier II cities may seem like the dream now, but how will you feel 10 years down the road?
there are also many hidden costs attached to owning property like property taxes, insurance premiums, and other recurring payments. homeowners also have to pay for regular upkeep of the house, and maintenance or aesthetic needs that arise.
currently, fuel prices are the highest they’ve ever been in India. this is directly going to impact the costs of construction and furnishing material. paints, glue, and even wood are all much more expensive than they were a year ago.
often people want to buy houses under development because they are cheaper. but due to lockdowns, projects have been forced to pause work for months at a time. this also causes the price to rise.
most loans disbursed are on a floating interest rate. these low interest rates won’t last forever. the US Federal Reserve has already projected that it expects to hike interest rates twice by the end of 2023 to fight inflation. other central banks, including India’s, may follow suit.
while it may seem like the perfect time to dive into the home owners’ pool in India, it’s important that you ensure your head stays above water even at the deep end.