Demonetisation effect: Is NOW the right time to buy a home?

Demonetisation. This single word has been the agenda in discussions across the nation. It sent markets into a tizzy, literally got people into a line (for the ATMs), and created a lot of panic among the consumers.

Prospective home buyers had been sent into a sudden state of uncertainty. While some stated that post demonetisation, property prices would crash, others predicted that real estate wouldn’t be lucrative anymore.

But, the developments post the entire ‘cash wapsi’ episode have only indicated that NOW is the right time for prospective home buyers. Here’s why.

Real estate prices in the primary markets will NOT crash

The property market in real estate usually includes Primary and Secondary markets. Ready-to-move-in homes that are developed by builders come under the Primary market. Purchases in this segment are mostly financed through home loans in an entirely transparent manner. This sector has a zero cash component and hence, it is highly unlikely that it will witness a drop in prices post demonetisation.

Consult a local expert to understand the current market sentiment for all property types

On the other hand, resale and land transactions that have a major cash component in their dealings are the sectors that will continue to see some distress.

Organised builders are not likely to reduce prices

Post demonetisation, property registrations in Bengaluru have witnessed a huge fall in numbers from 1800 to 200 per day. This trend is expected to continue for the next 3-6 months. While it is predicted that builders may reduce their prices due to this impact, it is important to remember that the primary real estate market now has many reliable and well-funded market players like The Address Makers (owned by Piramal Fund Management) who comply with the regulations. In the current economic scenario, builders are bogged down by high input costs (material, labour, land), and have to squeeze in profit margins.

Hence, it is highly unlikely that they would reduce the prices. Instead, they would prefer to wait for the market sentiment to turn positive.

Banks have lowered their home loan interest rates

This news has provided a great respite for prospective home buyers who were indecisive earlier. As predicted, due to the heavy cash inflow, banks have reduced their interest rates. Among public sector banks, SBI has announced a rate reduction from 9.15% to 8.65% (for loans up to 75 lakhs) and in the private sector, HDFC has announced a reduction from 9.15% to 8.7% (up to 75 lakhs).

Low home loan rates can ease your financial burden while funding your new home

As a new borrower, you can now pay lower EMIs for your new home. Also, the revised interest rates have led to an increase in the home loan eligibility limit for customers. So, now is a good time to buy your dream home or to get a pre-approved home loan for the same.

RERA can make real estate buyer friendly

The Real Estate Regulator Act (RERA) has brought in transparency and accountability in the real estate sector. The law makes it mandatory for developers to share all the project details, approvals, and schedules with the customers and holds them liable for any inconsistencies.

The right laws will now be able to secure the interests of the home buyers

All these measures, in tandem with demonetisation, will only lead to an efficient and reliable real estate sector that protects the interests of its consumers

Investing in real estate is now a smart move

The huge cash inflow due to demonetisation has ushered in a good time for real estate investment. In the Union Budget, the government may encourage the investment of surplus funds in infrastructure by providing tax-based incentives for the same. It may reintroduce tax deductions under Section 80CCF of the Income Tax Act, which is specifically formulated to attract investors and boost real estate and infrastructure through long-term infrastructure bonds.

Infrastructure is now set to receive a major boost from the government

This will invariably lead to the development and expansion of cities and boost property prices, making a real estate purchase a good investment decision. With banks offering low interest rates, you can now expect a higher ROI from real estate investments rather than that through bank deposits.

A longer wait may prove to be costly

Real estate prices are likely to remain stable for some time due to the low current demand. Most developers are adopting a wait-and-watch approach and may temporarily put off their new launches. Once the panic subsides and the consumer demand returns, the low supply and high demand will only lead to a rise in inflation and push the prices up.

Final word for Bengaluru

Bengaluru’s real estate market is significantly consumer centric, but property across categories is also perceived as an investment due to its equity in the long run. The highest demand comes from people who work in the IT sector and prefer developer built and bank financed homes. The low home loan rates and EMIs are gradually attracting buyers and in a few months, the buyer competition might only increase.

All these factors only indicate that NOW is probably the best time to buy your first home or invest in a new home. So if you are planning to buy a home, get started off on your home search, consult an expert, arrange your funds, and ‘Make the right move at the right time’.