Here Is Why Now Could Be A Good Time For A Property Investment

The mere suggestion that this is an appropriate time to invest in property might have left many a reader flabbergasted — how can now be the time to invest in a property when several developers are facing insolvency, there is a crisis in the shadow banking world and the government is announcing relief packages for a sector that has been unsuccessful in springing out of a slowdown for over half a decade now?  Well, there is no denying that all is far from alright in the Indian realty sector. However, this has also presented a never-seen-before opportunity for buyers and investors to invest in a property.

The price benefits in a correcting market

Prices falling in key markets; rising in new growth centres: Barring a few exceptions, residential property rates across India have remained unchanged or declined than what they were five years ago, partly because overvalued immovable assets led to buyers ditching the market.

From Rs 5,250 psf in July 2015, property rates in Noida have declined to Rs 4,950 psf in July 2019, show data available with propTiger.com. A decline in prices was also seen in Gurugram, Noida’s posh peer. From Rs 5,000 to Rs 5,150 psf, prices have changed marginally in Chennai.

If this acts as a prompter for those buying property for own use, investors who would like to bet on an appreciation, have a reason to invest in Tier-II and Tier-III cities, which have turned out to be the next growth centres, infrastructure and price wise. The Reserve Bank of India’s House Price Index (HPI) shows Kochi property values increasing over 28.8 per cent in the third quarter of financial year 2018-19 when compared to the same period last year, the highest seen in any city. On comparing the price movement in the past five years, Lucknow has seen the sharpest movement with property prices increasing by over 13 per cent, shows the HPI.

Interest rates are at record low: With consecutive cuts, the RBI has brought the repo rate at a five year low of 5.40 per cent. Following the reduction, banks have also reduced interest rates on home loans. Bank MCLRs currently stand in the range of 8.30-9 per cent. To trigger activity, banks have also launched repo rate-linked products in the market, where borrowers could get home loans at an annual interest of 8.05 per cent.  

Higher tax deduction: The 2019 budget has proposed an additional Rs 1.50 lakh deduction on the home loan interest component for loans taken to buy units priced below Rs 45 lakh. This would substantially bring down the cost of purchase for buyers of affordable property.

Lower GST: Those who are investing in under-construction properties will also find it convenient to invest, since GST on affordable housing has been brought down to one per cent. For other projects, the levy stands at five per cent of the property cost.

Options aplenty

Ample ready-to-move-in stock: The various instances of project delays have discouraged buyers from investing in upcoming projects. Such buyers have a large ready-to-move-in stock to pick a unit of their choice and budget.

As of Q1 FY20, nearly eight lakh housing units are lying unsold in Indian’s nine prime markets, show data available with PropTiger.com and nearly half of these stocks are homes priced below Rs 45 lakh. Numbers available with the brokerage firm also show another 500,000 fresh units would join the market by March 2020.