Want to invest in property? Now is the right time

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The Bangalore residential property market witnessed an absorption of 4,182 units in the first quarter of 2012 against 3,370 units in the last quarter of 2011.

An estimated 25 residential projects were launched in the first quarter of 2012 while eight residential projects comprising 1,009 units across different submarkets were withdrawn from active stock as they were completely sold out, according to a Jones Lang LaSalle’s quarterly survey.

A number of factors have recently eased the hardships faced by homebuyers earlier. Any delay on the part of end-users in acquiring a home will only be at a higher cost now. However, times are changing and there are several factors that will reduce the issues faced earlier while investing in a home.

The Reserve Bank of India (RBI) has cut the repo rate by 50 basis percentage points paving the way to making home loans cheaper. Housing finance companies and banks are expected to reduce the lending rates shortly.

One bank has already offered to re-price its existing home loan at a lower interest rate. Under this option, borrowers can switch to the prevailing floating rate that is at a discount to the prime lending rate. The borrower has to pay a one-time ‘switchover fee’ of one percent of the outstanding loan. Some banks have slashed their lending rates by 75-175 basis percentage points. The rate cuts will be applicable to new borrowers.

With the land, input and labour costs soaring, home prices are inching upwards across all micro-markets. According to industry sources, taking into account price increases of the four key construction components, steel, cement, labour and bricks, there is an 18 percent gross rise in construction costs over the last two years.

Moreover, new projects, improved connectivity levels and infrastructure development will only up the soaring land costs every year. And the State government too revised guideline values for registration, which will only add on to the housing costs.

All this implies that any delay on the part of end-users to enter the market would only be at a higher cost later. Also, the increase in the service tax rate from 10.3 percent to 12.36 percent will increase the costs of production for developers.

A significant trend is the availability of built units in select locations. Large projects developed by builders led to construction unabated, and as a result homebuyers can plan their property purchases accordingly. The timing is also appropriate for those keen to invest in the affordable housing category as the lending norms and fiscal sops extended in the Union Budget for 2012-13 provide ample scope for end-users to strike a bargain deal.

External commercial borrowings (ECBs) have been allowed for low-cost housing. The developers will be able to lower their interest costs now as there is a significant difference in the interest rates between here and other countries.

Further, the extension of the one percent interest subvention scheme for home loans up to Rs 15 lakhs for affordable housing continues for another year which will benefit homebuyers in the unit prices up to Rs 25 lakhs. The National Housing Bank has been allowed to raise Rs 5,000 crores through tax-free bonds which provides refinance to housing finance companies.

source: http://articles.economictimes.indiatimes.com/2012-04-20/news/31374052_1_lending-rates-home-loans-interest-costs

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