Want to buy your dream home? The rainy season might help

The monsoon season isn’t considered the best time to buy a home or any fixed asset, for that matter. However, with interest rates on home loans – and also in general – on the rise, many homebuyers who were sitting on the fence now face a dilemma: now or never. Here are a few things to keep in mind while scouting for a house.

House inspections

Though many people associate the monsoon with waterlogging, slow-moving traffic and a time for low business activity, the rains actually help a homebuyer.

The rains expose leakages in buildings, waterlogging problems, and creaky infrastructure that goes below water, leaving people in trouble. In the case of a pre-owned house, inspection becomes a key aspect of property purchase.

“It is preferable to view a property during the monsoon. It gives you a clear idea of the current condition of the property and you can make a more informed decision,” said Naushad Panjwani, founder of Mandarus Partners.

Buyers can figure out low-lying areas and avoid ill-maintained properties. Sometimes owners in financial distress fail to maintain their properties. Such properties, if they are in a good building in a nice locality, can be a worthwhile purchase provided the cost of repairs is factored in while quoting a price.

Keep tab on prices

It’s fairly certain that housing prices are not going down. In some pockets, developers have already announced price increases.

“A steep increase in input costs and to some extent increase in labour costs have put developers’ margins under pressure. There are no discounts being offered by developers. Instead, expect house prices to go up as economic growth catches up,” said Panjwani.

Though developers may not give a discount, they may offer a freebie as sales are typically slow in these times. A pre-approved home loan and a bank balance adequate enough to make a down payment tells the developer how serious you are about buying a house.

If the funds are already arranged, then an attractive deal may come one’s way in the pre-owned property space. A seller in a hurry may be willing to cut the price marginally to close a deal quickly, aware that another buyer may not come along soon.

Affordability may come under pressure as interest rates move up. According to the mid-year review of the Affordability Index by Knight Frank India, the cumulative 90 basis point rate increase in interest rates by the Reserve Bank of India in May and June has decreased home purchase affordability by an average of 2 percent across markets and increased the EMI load by 6.97 percent.

Loan it right

Home loans are inevitable for house purchases, given the high prices. A carefully assessed loan option can reduce stress.

“Soon, we expect lenders to roll out monsoon special home loan schemes offering waiver of charges and other incentives for borrowers,” said Vipul Patel, founder of loan consultancy firm MortgageWorld.in. For instance, State Bank of India (SBI) had announced Monsoon Dhamaka offer in August 2021, giving a 100 percent waiver on processing fees for home loans.

Property buyers can compare various offers across lenders and approach the right bank. Lenders are not overwhelmed with loan enquiries in these times and they are more likely to offer a relatively better deal.

“If possible, try to go for a home loan which offers a fixed rate of interest for a year or two as the interest rates are in an upcycle,” said Patel.

Rising interest rates make it imperative to be prudent with borrowing. The amount payable as equated monthly instalments (EMI) should not exceed 40-50 percent of your net take-home income.

“Since home loans are typically taken for a 10 to 20-year tenure, one can always see a rising interest rate scenario in such a long time and one has to be prepared for it,” said Parul Maheshwari, a Mumbai-based certified financial planner.

Do account for an uptick in interest rates and the resultant increase in EMI amounts or an extension of the home loan by a few years.

“Use surplus money like bonus or a salary increase to repay home loans early,” she adds.

Home loans are large liabilities and need to be paid out over a long period. The last thing one wants is to forego the house in case of an eventuality. Hence, it makes sense to purchase adequate term life insurance along with other covers to avoid such a situation.