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Want to buy a house but worried about your job? Here's what you can do

It’s the job market that predominantly drives the housing market. Since an economic slowdown in some major developed countries could hurt the job market in India, buying real estate could become an uphill task in 2023

Since the onset of 2023, real estate industry stakeholders have spun "misplaced optimism" in the hope that it would encourage homebuyers to sign on the dotted line and help keep their cash registers ringing. Sample this:

1. This is the beginning of a bull run in the Indian real estate sector

2. Homebuyers are increasingly upgrading to bigger houses

3.  Work-from-home has turned holiday homes into primary homes

4.  It is a buyers’ market

5. There are several choices available for homebuyers, including ready-to-move-in inventory

6. Property prices are expected to increase

7. Increasing wealth of Indians is fuelling a demand for luxury homes

8. India’s real estate market has always been a preferred option among high net worth individuals (HNIs) from foreign countries

9. Non-Resident Indians (NRIs) are taking advantage of dollar appreciation

It should be noted that what predominantly drives the housing market in any part of the world is the bullish job market. And 2023 may have its own challenges with geopolitics impacting India’s real estate segment.

An economic slowdown in 2023 in a few developed economies would likely hurt profitability, especially in the technology sector. This is what has had Indian homebuyers worried and they are apprehensive about making any commitment to this costliest purchase.

The facts speak for themselves:

1. Unemployment rate of 8.30 percent is near an all-time high, as per CMIE data

2. Global giants like Google, Microsoft, Amazon, Twitter, and HCL, among others, are laying off employees

3. Cautious outlook of global IT giants indicates a rough ride ahead in the Indian job market

4. Reduced flows of IT/ITeS work outsourced to India and further layoffs could lead to distress sale

5.  An imminent US recession in 2023 to impact housing demand in India

6. Salary cut is a grim reality in many industries

7.  Foreign investors are exiting their Indian investments

8. Domestic private investment levels have remained consistently low and so has (domestic) manufacturing growth

9. Industries across sectors are way below their capacity utilisation

10. Global slowdown seems to affect the Indian market as well

11.  Developers are not able to hike prices despite a steep hike in input costs

Do all these indicate a booming housing market ahead by any stretch of imagination? One leading voice in the real estate sector privately admits that this may be a challenging year. According to him, even though input costs have touched the skies, developers have no choice but to offer discounts, as many are sitting on huge inventory and the interest burden is hard to bear.

“Every year (at Budget time), the industry comes out with many oft-repeated demands. But post the Budget we are left with no choice but to concede that this has been a historic Budget. Similarly, whatever be the market conditions, we are always hoping against hope," says the developer requesting anonymity.

So, here’s what homebuyers should keep in mind before making any commitment to buy property.

1. Is my job stable?

2. What if I lose my job this year?

3. Will I be able to service EMIs if I have to bear the brunt of a salary cut?

4. Will interest rates continue to rise in the foreseeable future?

5. Will I be able to manage fixed monthly expenses if inflation continues to rise?

6. Will house prices beat inflation in the short to medium term?

Needless to say, when a home buyer does his own cost-benefit analysis, the odds are heavily loaded against buying a house. No one within the built environment of Indian real estate would deny the fact that the pace of new launches would remain slack this year as there is a huge unsold inventory.

Also, if one adjusts property prices with inflation, one will find that there has been degrowth.

This brings to the fore the most critical question as to who should buy a house in an uncertain economic environment. One should commit to life’s costliest purchase with a long commitment only if:

1. The house is for self-use and not for investment

2. The cost of the house is not more than four years of gross income

3. One’s job is stable with growth prospects in the foreseeable future

4. One has the capacity to pay 40-50% upfront

5. One is not finding a better deal in the distressed secondary market

6. One can manage a year or two in the unfortunate event of job loss or salary cut

7. The debt-to-income ratio is not more than 30-40 percent of the take-home salary.

Ravi Sinha is CEO, Track2Realty.
first published: Jan 28, 2023 10:20 am