Real Estate in India is in a
peculiar situation with enough supply from smaller developers and not much
inventory especially nearing possession from grade A developers. While
recession and other doomsday predictions are based on generic concepts the ground
reality is quite different, especially in Bangalore where amongst the top 3
developers in the city there is hardly any availability in ready to move in and
nearing completion projects! Yet as they say the crisis brings an opportunity
to get some real deals on the table across the board. We feel the next few
months will present a golden opportunity to serious buyers and here are a few
reasons.
1.
Real
Estate prices are already low
It’s been a buyer’s
market since last few years where hyper competition amongst developers led to a
scenario where prices barely went up! infact they underperformed inflation too
in some cases. The demonetization and
GST further led to a lot of confusion and delay in decisions with investors
sitting on the sidelines due to expectation of better pricing, which meant last
few years majorly only the serious buyers were there in the market. Today we have a scenario which is presenting
an opportunity for investors with a glut of schemes and offers for investors
which are highlighted further in the article.
2.
Bangalore-
a city for all seasons and reasons
Unlike other
cities which are either financial capital or IT hub. Bangalore is one of the
few cities which apart from being a major IT hub also has a huge presence of
non IT, start up hubs, largest ecommerce firms, aerospace companies etc. The
opportunity will only increase as many companies would look to expand beyond
China in the medium term and Bangalore is expected to be at the forefront of it
due to its human capital, availability of land, resources and overall investor
friendly environment.
3.
Lowest
ever home loan rates
The home loan
rates of around 7.15-7.55% today are one of the lowest ever. With effect from
October 1, 2019, as per mandate by the Reserve Bank India (RBI), banks have to
link interest rates on home loans, to an external benchmark rate. RBI has asked
banks to link their lending interest rates to any of the four external
benchmarks:
- RBI's repo rate
- Government of India 3-months Treasury bill yield
published by Financial Benchmarks India Pvt. Ltd. (FBIL)
- Government of India 6-months Treasury bill yield
published by FBIL
- Any other benchmark market interest rate
published by FBIL
Most banks have opted to link the
interest rate on loans to RBI's repo rate. A bank's interest rate linked to the
repo rate is called Repo Rate Linked Lending Rate (RLLR). This move has led to
a lot transparency and led to a scenario where banks have to reset there rates
once every 3 months. Therefore, in case of any change in the external
benchmark, for instance, repo rate in the above table, then banks will also
have to change the interest rate they are charging you for the loan taken.
4. Payments plans – Never Before & Never
Again
The payment
plans today are never heard before in the real estate market even for a ready
to move in project. Investors based on their cash flow can today choose and
structure a payment plan with very little initial commitment.
- Pay
5% under subvention and balance at possession
- Pay
25% every year
- 12
month free interest offer on ready to move in properties
- Book
now by paying 5% and stay for a year post completion and if not ok return the
property back!
The schemes and
offers are real! If one is serious in this market to buy then the offers will
lead to huge savings both for ready to move in and under construction
projects.
5. Pro Buyers Reforms
GST and RERA
implementation are two of the strongest pillars on which the real estate
development foundation is built. The fly by night and non serious players are
already out of the market and with strict compliance the developers today are
promising what they can deliver and deliver on time! This gives a strong boost to buyers ensuring
all the titles of the project are clear and they are covered under RERA in case
of non compliance by developers.
The government
has extended the deduction of interest on home loan by Rs 1.5 lakh to Rs 3.5
lakh and flat 1% GST for under-construction affordable housing to boost demand.
6.
Rupee
Depreciation
The Indian rupee
fell from Rs. 69 last year to around Rs.77 against the US dollar almost 12%
more for each dollar that gets converted. This along with the above mentioned
factors makes investing in India extremely attractive for NRI investors and
people looking to relocate to India in the future.