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Best Time To Buy A House For Own Use: ANAROCK

Builders are willing to sit across the table and give you a good deal, if you are a serious buyer

Jan 13, 2020 / 09:09 AM IST

Incomplete projects have made many home-buyers averse to buying under-construction projects. Despite measures announced by the government in terms of infusing liquidity and improving the sentiment, there aren’t too many buyers in the residential real estate market. The Union Budget of 2020 is expected to offer some sops for the sector and home-buyers. Prashant Thakur, Director and Head Research, ANAROCK Property Consultants elaborates on some of the key issues engulfing the real estate sector in an interview with Nikhil Walavalkar.

Is it a good time to buy a house for own living?

This is the best time to buy a house if it is for consumption, because there is ample amount of unsold inventory, of close to 640,000 units in India. Developers are under severe liquidity pressure and are only relying on the cash flow that they would generate from their projects. Interest rates are also at low levels. Builders are willing to sit across the table and give you a good deal, if you are a serious buyer. They are not charging for floor rise or preferred locations.

So, this year is the best time to buy a house. To avoid execution risk and payment of goods and services tax (GST), ready-to-move-in houses would be good for home buyers.

What are the key factors we should keep in mind while buying a house?


In the case of an under-construction property, you should go to the Real Estate Regulation Authority (RERA) website and check the credentials of the developer and also find out whether the project has got all the approvals.  Also, look at the developer’s past projects, some social media forums where the developer’s previous buyers may have expressed an opinion about the delivery standards of the builder. In times of liquidity crunch, you should be sure that the builder will complete the project. Having all approvals in place does not guarantee the completion of a project. If the developer has too many under-construction houses, he may face some difficulty in completing those projects. Do not forget to analyse the locality, connectivity of that location, socio-economic infrastructure, among other factors.

For a ready-to-move-in property, check whether the developer has got the completion certificate. To avoid GST, you need one and it also ensures that the project has been completed and it has got all approvals from the authority concerned.

Has RERA delivered on its expectations?

Given the opaqueness of this industry, it needed an independent regulatory body. It has definitely created a right environment for the property buyer. RERA does not allow any developer to market a property unless it is registered with the authority. The RERA appellate tribunal is a dedicated platform to address the grievances of the property buyers.  It has brought in transparency in terms of the information about progress of the project, numbers of units sold, as such disclosure is mandatory on a quarterly basis.

The RERA appellate can pass a judgment, but it is not an enforcement authority right now. That is a big gap. Quarterly updation of information from developers is still lagging because the infrastructure to follow up is missing. The manpower to do so is still not available. RERA has done a lot of work but still more ground has to be covered.

What are the expectations of the real estate sector from the Union Budget 2020?

The Government has done a lot in terms of de-clogging the supply side by bringing in a Rs 25000 crore real estate fund and by providing additional liquidity to housing finance companies. Though the government has tried hard to get stuck projects on track, the real challenge is to boost demand. If people do not buy properties, then the inventory will not be cleared and cash flows will not start.

To boost demand, the government should give some impetus in this budget by increasing the limit of tax exemption on home loans. The interest deduction on home loan should be hiked to Rs 5 lakh from the existing Rs 2 lakh.

GST payable on under-construction houses is also a reason why they are not getting sold. The Government should offer a GST holiday for a year to all under-construction residential projects, to boost the demand. Unfortunately given the rising fiscal deficit, there is not much fiscal space for the government to act on this wish-list.

What are the chances of investors recovering their principal and making gains from real estate/alternative investment funds?

When the industry was growing, developers were rushing to acquire land. The funds raised from buyers and investors was used to acquire more land instead of completing the project. This was the case in the pre-RERA days. Buyers were willing to pay and the prices were going up. But the projects were stuck and, at some point, they became unsustainable. When actual delivery was supposed to happen, most of the projects ran out of cash flows. These incomplete projects still require amounts that are far more than what was actually committed. Land banks cannot be sold as the market is too tight. Naturally, investors in these schemes have had to wait for long. Either they have to wait for some last mile funding to come in to ensure that these projects get completed or have to pump in some amounts themselves.

That's why if you look at alternate investment fund that the government has announced, it mentioned a strict clause that the funds will go only into those projects that are networth positive.

There's very low chance that they can recover that money from these projects. So, the situation for these investors is very tricky. Most of them would find it very difficult to recover the money or to exit at a profitable rate. They will have to take a haircut.
Nikhil Walavalkar
first published: Jan 13, 2020 09:09 am

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