Snigdha Sharma, 38, works with an IT firm in Bengaluru. Thanks to the pandemic, she has been forced to work-from-home for the last eight months. Not sure when she is likely to be called back to work, she now spends her free time either researching on real estate projects or calling up brokers to fix an appointment for a site visit. COVID-19 has given her loads of time to rethink her investment decisions and buying a home in 2021 is one of her New Year wishes.
So, are there enough compelling reasons for her to purchase a property now? The answer is yes since she seems to have a secure job and can afford it. This means that one should decide to go in for a house purchase only if one has enough savings to fund at least 30 percent of the cost of the apartment.
Another reason is that post the pandemic property valuations today are at realistic levels, mortgage rates are at the lowest, some states have started reducing the stamp duty to make property purchase relatively affordable, developers are offering flexible payment schemes such as 10:90 and waiver of GST, stamp duty and other benefits.
What this means is that post the pandemic, one is at least assured that one is not buying a property at ridiculously inflated prices.
Buying now equals buying at the lowest possible price
Home loan interest rates are at a 15-year low. Coupled with the bottomed-out property prices and additional discounts and offers by developers, there are very real savings to be secured on life's most cost-intensive investment.
Housing affordability has improved in tandem with the times. To boost consumption, the RBI has brought lending rates down to a two-decade low and thrown several other sweeteners into the mix. In Maharashtra, stamp duty charges were brought down in August 2020.
On their part, developers have not only trimmed prices to their lowest best, but also responded to the current exigencies by offering several cost-saving incentives. Moreover, serious buyers can negotiate the final price like never before.
“Developers are doling out multiple deals and discounts to lure buyers along with the government. incentives (limited period-stamp duty cut in Maharashtra) leads to almost 5-15% reduction in overall cost acquisition. Developers will continue to fuel demand in 2021 as well,” said Anuj Puri, chairman – ANAROCK Property Consultants.
There are also several options available in the market, even in ready-to-move properties. Moreover, prices of RTM properties are almost at par with under-construction homes in many areas. This has never happened before - and since developers have curtailed new supply, it is unlikely to happen again. Never have homebuyers had such a tempting choice range, at such low prices, he says.
There are more compelling reasons. According to Anckur Srivasttava of GenReal Advisers, one should plan to buy a property within the next 100 days because real estate is unfortunately not about buying any unit but about a unit that you would like.
“While three months down the line you may still find the unit, it may not tick all the boxes or the floor you prefer to be on or the Vastu direction or the window facing direction,” he says, adding due to the pandemic there are several buyer-favouring market circumstances and these factors are unlikely to repeat themselves.
What should you buy?
First, who should buy? Salaried people who wish to buy their first house. Those who already own a house can consider upgrading to a more spacious apartment due to the compulsion of working from home on account of the pandemic.
Besides apartments, buyers could even consider buying into a plot by a Grade A developer.
The top cities like Bengaluru, Hyderabad, Chennai, Pune and Gurugram are seeing high demand for plots in the wake of the new realities presented by COVID-19. Some of the leading developers with plotted developments now include DLF Ltd., Mahindra Lifespaces, Raheja Group, Godrej Properties, Century Real Estate, Puravankara’s Provident Housing, Shriram Properties, Goel Ganga, TVS and Alpha Corp, among others.
The minimum size of marketable plots is as low as 550 sq. ft., and goes up to 10,000 sq. ft. In select projects, larger plots are also available. Plot sizes ranging between 1,200 - 2,500 sq. ft. are seeing maximum demand. However, in the southern cities of Bengaluru and Chennai, smaller plots of average sizes 550 - 750 sq. ft. are also generating interest.
In the midst of the COVID-19 pandemic, demand for plots has gone up as homebuyers see this asset class as a low capital investment with limited project execution risks and faster exit opportunity while for developers it is a means to generate quick cash flows and a smart strategy to liquidate land banks for raising working capital.
“Four floors with 12 bedrooms and large-sized living rooms on a single plot for Rs 2 crore offers a better investment proposition than a similarly priced apartment in a high-rise for which a buyer may have to wait longer for the project to get completed,” say real estate experts.
The asset class requires minimal capital investment, limited project execution risks and faster exit opportunity, says Anuj Puri, chairman – ANAROCK Property Consultants.
Builder floors are also more efficient than apartments. During COVID-19, several tenants residing in high-rises moved out to affordable builder floors where the maintenance costs are less. Therefore, builder floors are more ‘efficient’ than high-rise apartments as the common area is greatly reduced.
The focus on dispersed offices and flexible workplace policies in the wake of the COVID-19 pandemic is expected to spur housing demand in the peripheries of cities, beyond the city centre hotspots due to which integrated townships may become popular among buyers.
According to data made available by Anarock, the National Capital Region (NCR) has the maximum number of integrated townships - 42 projects with approximately 1.33 lakh units, followed by the Mumbai Metropolitan Region (MMR) with 17 projects having around 63,500 housing units, it said.
“Clearly, this is a hugely underserved segment whose underpinning relevance and importance has been emphatically brought to light by the pandemic. During the COVID-19 pandemic, there is a strong rationale for living in integrated townships. These self-sustaining, compact urban ecosystems are now more than just lifestyle upgrades - they provide the kind of controlled environment that makes a big difference during such an outbreak,” says Puri.
Things to keep in mind before buying a house
A buyer should make sure that the title of the seller is clear and it should be free from encumbrances. In case of a secondary purchase, all the documents related to the property for a period of 30 years should be examined, if not 30 years then documents for a period of 12 years should be examined.
In case of a new project, the layout plan should have been approved from municipal authorities. Occupancy certificate from the competent authority should be obtained before handing over the property. If this has not been obtained, there is a risk of the property getting demolished. There may also be penalties under building bye-laws of that area.
Is a ready-to-move-in property better than an under construction one? Well, it certainly is as you do not have to pay both rent and EMI and it reduces the delay risks associated with a property that is still getting constructed. But is it not expensive? Not so in a market where there is huge inventory available and there are good deals available if you do your homework well. Also, too much inventory in the market has helped keep a check on prices.
The project should also be registered under RERA and the buyer should verify if all provisions have been complied with. And most important, even if the project is RERA-registered, do not purchase property from a builder who is sitting on debt.
Make sure you try and keep three to four options open and not get stuck to a single property. The golden rule is to explore. Out of the four properties you select, at least one seller in the resale market or developer will get back to you. The buyer should be willing to negotiate hard or to walk away.
It’s advisable for buyers to choose the right location. See that there are proper roads leading up to the project, enough shops for daily needs, schools and hospitals are close by. Most importantly, check the distance to your workplace and the mode of transport available.
Last but not least, remember you are buying a property during the pandemic for self-use, so don’t expect property prices to appreciate for the next two years.