The Indian economy slowed due to Covid-19 and the subsequent lockdown. During this lull, the Indian real estate market suffered the most. The sector witnessed a massive hit, evident from the inventory list left unsold. But, as the economy makes a turnaround, the real estate sector is also bouncing back.
Investors, who were hesitant to enter the market for a long time, are becoming active due to the rising demand for homes. And this is despite the hike in home loan rates and the rising real estate prices in India. However, many homeowners are clueless about the reasons for such a real estate growth rate in India. They are also trying to understand if they should buy a house in the current market.
The decision to buy a house depends on various factors, such as affordability, location, loan servicing capability, and property rates in Mumbai. While there are no set rules to arrive at a decision and uncertainty around will real estate prices fall continues to hover, these pointers can help determine if it is the appropriate time to buy a house.
Should You Invest in the Indian Real Estate Market?
1. Low pricing trend
The Indian real estate market witnesses cycles when the valuation of properties is either stable or low for a period. Such phases are apt for purchasing homes at affordable rates.
2. Interest rate
While interest rates touched a historic low of less than 7 percent, they have again risen in recent months. But they are still not as high as they were a few years back.
The current home loan interest rates range around 8.5 percent suggesting that it is a good time to buy a home. Moreover, with the stubborn inflation and the expected rate tightening by the central bank, locking into a property deal while the rates are comparatively low is a good idea.
A higher interest rate converts into higher EMIs and tenures. Therefore, as long as the interest rate is low, one must step forward and seal the deal.
3. Credit score
An individual with a good credit score will likely get a better interest rate deal. Therefore, maintain a credit score above 750 before initiating the home-buying process. Regardless of the rising housing prices in India, if one does not have a high CIBIL score, one cannot bargain with the lender.
Even a difference of 25 points will affect the interest rate, thereby accruing considerable savings during the repayment period. Therefore, if the creditworthiness is high, it is a good time to buy a house.
4. Sufficient liquidity in hand
Financing solutions are great when it comes to buying a house. But it is vital to understand that the lender does not fully fund the house. Instead, the buyer needs to set aside a percentage of the property value as a down payment while the home loan provider funds the remaining value.
After inquiring about the flat price in Mumbai, one must check if there is adequate liquidity to pay the down payment before initiating the buying process.
5. Management of liabilities
If an individual has all existing financial liabilities under control and can manage them with a home loan EMI, it is wise to buy a house. Even though the rising prices will demand more funds, the uncertainty around having a residence will be eliminated.
EMIs for home loans is a sizeable amount of money; to meet the monthly obligation, one must exercise tremendous control over expenses. Moreover, it is advisable to settle existing loans before adding the liability of fresh ones.
6. Better cash flow management
Cash flow plays a crucial role in buying a home. If current and future cash flows are manageable, it is a good time to invest in a dream home.
How is the Real Estate Market in India?
The demand for housing continued to remain unabated despite RBI’s two hikes in the repo interest rate. Moreover, it shows no signs of diminishing. Interestingly, the phenomenon and growth are not limited to a few metropolitan or urban cities which serve as the benchmark of the Indian housing market. It extends to all housing markets across the country. As expected, Maharashtra leads the pack, with Mumbai and Pune recognized as two of the country’s leading real estate destinations.
With the residential market continuously witnessing growth and poised at an inflection point given record purchases each month, the potential home buyer faces a twin dilemma of increasing interest rates and demand causing higher residential prices. An evaluation of the scenario suggests that the buyer must buy their dream home before prices peak.
Disclaimer- This article is based on the information publicly available for general use as well as sources mentioned herein. We do not claim any responsibility regarding the genuineness of the same. The information provided herein does not, and is not intended to, constitute legal advice; instead, it is for general informational purposes only. We expressly disclaim any liability, which may arise due to any decision taken by any person/s basis the article hereof. Readers should obtain separate advice with respect to any particular information provided herein.