Navratra – Diwali Best Season For Home Buyers

The Indian economy expanded by 7.3% during FY 2014-2015, according to the Statistical Office – the fastest rate of economic growth in the world, coming just as the Chinese economy is losing steam, with its annual growth slipping to 6.8%. The same organization forecasts growth of between 7-7.5% for India in 2016-17. This along with many other reasons makes it prudent to buy property this festival season.Navratra – Diwali Best Season For Home Buyers

MORE TAX BENEFITS:  By introducing an additional deduction of Rs 50,000 in the Budget 2016 proposal, Finance Minister Arun Jaitley has given some reason to cheer to the first time home buyers.

This additional deduction has been given on interest for loan up to Rs 35 lakh, provided the house value doesn’t exceed Rs 50 lakhs.

A home buyer in India is entitled to claim both the interest and principal components of home loan repayments for tax benefits. Currently interest payable on a ‘self-occupied’ house is subject to a maximum deduction of Rs 2 lakh under the head ‘Income from House Property’.

Taxpayers and industry experts were expecting the government to increase the tax deduction limit for housing loans, especially in metropolitan cities, by about Rs 1 lakh to Rs 3 lakhs as the current limit of Rs 2 lakhs is insignificant.

LOWER HOME LOAN INTREST RATES: Home Loan is offered to individuals who wish to purchase or construct a house. The property is mortgaged to the lender as a security till the repayment of the loan. The bank or financial institution will hold the title or deed to the property till the loan has been paid back with the interest due for it.

Banks have become very active into this sector right now as when credit off take in the industrial sector has been low. With lot of funds waiting to be deployed, the housing scene has presented an attractive option to the banks to channelize their funds. This is particularly so, because in the housing sector advances are given against mortgage of assets, which continue to carry value, and therefore make the loans considerably safe.

The other significant factor that has kicked up a lot of activity in the housing area, is today’s steadily falling interest rates of loans. The customers today enjoy tremendous choice and can approach those giving out finance at lowest rates. The fall in the rates has been phenomenal over the last 4 to 5 years. From rates that were around 15% and over, they have plummeted to around 9.50% and even lower.

The customer who is purchasing a house today has not only the options of competitively lowest rates of interest, but also choice of different types of loans starting from the house-purchase or house-building loans to house-improvement loans, home equity loans [ loans on mortgage of property] , home extension loans, NRI loans etc. It has never been better than this ever before.

STABLE PROPERTY PRICES: Will apartment and property prices go up, stay stable, or fall further? I am hit by this question regularly and increasingly as we approach a New Year. Through 2016, property developers and investors sitting on plenty of real estate have been hoping feverishly for sales and prices to recover. Those who want to buy on the other hand, have been demanding more discounts and cheaper homes, and are still not convinced that they should take the plunge.

“Prices will not come down further. The industry itself has already said that prices have come down by 15% in the past year. Obviously, for some developers the cut could have been more, given the level of desperation there may exist. But, I think that we are really looking at the bottom of the barrel as far as the prices going down is concerned. If you look, the construction costs haven’t come down. Yes, the steel and cement prices may have come down but labour costs have gone up, statutory dues have gone up and I don’t see any significant reduction in land pricing happening” argued Brotin Banerjee, CEO, Tata Housing.

Big question: Will Indian property markets start recovering at some point?

Pirojsha Godrej’s assessment: “I’d be lying if I said I knew when that turnaround will happen, but I think it will happen sooner than people think, and I am confident it will be sharper than people expect. Because there is no doubt in any of our minds that there is going to be tremendous demand for Indian real estate and this is going to be a multi-decade-long road story.”

Anita Arjundas, a business head who always presents her point with the most soft-spoken clarity, added “Look at data in terms of promotions, offers, and the fact that almost all projects today are launched on payment linked plans. So you pay 20% now, 80% on possession – that’s straight discounting. Prices have definitely corrected at a project to project level by 10 – 15% and even where they have remained flat all through, there is time discounting.”

So here’s what I think: cut through the noise and get the deal you want on property now because I agree with the view that when the turnaround comes, it will be much sharper than anyone expects.

MORE HOMES IN AFFORDABLE SEGMENT: Most of the metro and large cities are witnessing the launch of affordable projects as a number of developers are launching affordable housing projects in line with the Govt. agenda focusing on affordable housing.

Affordable housing refers to housing units that are affordable by that section of society whose income is below the median household income. Though different countries have different definitions for affordable housing, but it is largely the same, i.e. affordable housing should address the housing needs of the lower or middle income households.

There have been several affordable housing projects that were sold out within days or weeks of launch. Whilst a short period of construction results in an accelerated construction-linked payment from buyers, assured sales and reduced cash-flow risks.

Currently there are over 500 affordable housing projects spread across the country. This brings an ideal opportunity for one to own a house while the sun shines.

ATTRACTIVE PAYMENT SCHEMES: Most of the builders have come up with an array of payment schemes like 20:80, 5-80-10-5, zero down payment, 1% down payment, No EMI till possession, Rent Back scheme and the like. This effectively brings the total cost of owning a home substantially down by as much as 15%.

Besides, with the prepayment penalty on home loans having been scrapped and interest rates on their way down, this may be the best time for home loan borrowers. As credit pick-up remains lukewarm, with the growth in home loans having slumped to a five-month low, many banks have launched attractive schemes to woo customers. There have been schemes like Cash Back by ICICI Bank, EMI waiver by Axis Bank, Combo Loan offers from SBI, UCO Bank, Central Bank and Vijaya Bank.

However, before you fall for these offers, go through the fine print carefully.


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