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Why owning a home is imperative during uncertainties?

Why owning a home is imperative during uncertainties?

Of late, owning a house has been projected as something that’s ‘out of fashion’, especially for the millennial population of the country. However, the coronavirus outbreak in the country has highlighted the advantage of having your own house as compared to availing a rented accommodation. Scores of individuals are battling concerns about their ability to pay monthly rental during the ongoing lockdown period.

Home owners incurring equated monthly instalments (EMIs) to pay off their home loans have recently been offered a three months breather in the form of EMI moratorium by banks.

Having an EMI has thus proved more beneficial during these times versus paying a high monthly rental that could have otherwise been used to own an apartment. Going forward, this realisation will play a catalyst’s role in influencing the decision to own a house in the minds of potential buyers.

Many optimistic trends that are already visible in China have opened up business post the COVID-19 lockdown phase. In fact, a report by one of the leading global consultancy firms said that sales of residential units in March 2020 has already bounced back to almost 95% of what was being witnessed in December 2019.

Industry experts are of the view that sales of residential units in India, which is still very low on house ownership levels, will witness a significant uptick. Among factors that will influence this trend in India are increasing urbanisation, the need to own a house and availability of homes loans at the lowest interest rates in a decade.

In the works are efforts by various industry bodies that are pushing for additional tax sops for home buyers and reducing stamp duty rates to 1% for any new apartment sales over the next four months to name a few. The representations, if accepted by the government, will go a long way in providing the much-needed boost to the Indian real estate sector in this hour of need.

On its part, the Reserve Bank of India (RBI) in its policy decision towards the end of March 2020, slashed repo rate by 0.75 basis points (bps). The biggest rate cut in a decade now, this move has brought cheers to potential home buyers who have been sitting on the fence thus far. In fact, most banks have already passed on the benefits by slashing their rate of interest for home loan borrowers effective April 01, 2020.

The move by the RBI has brought interest rates on home loans to its lowest ever in the last 10 years and this will significantly encourage potential home buyers once the Covid-19 situation settles. Another confidence-boosting aspect that showed up in consumer sentiment surveys is that buying real estate continues to be a safe and viable bet in the minds of most buyers. This positive sentiment comes at a time when the stock market is not really at its best and has wiped out most of the gains even for those investing in mutual funds as part of their long-term strategy.

The equity market isn’t doing well either. The BSE Sensex that touched a high of 41,940 in January 2020 is already down to around 30,602 levels in the third week of April 2020. Another popular asset class for investment, the yellow metal has become significantly volatile as well. While touching a high of Rs 46,160 in March 2020 the price of 10 grams of 24-carat gold continues to be highly volatile. After correcting to Rs 41,680 in the first week of April 2020, it has recovered a bit but continues to trade at lower levels and the price of 10 grams of 24-carat gold is currently hovering at around Rs 44,614.

Players in the real estate sector have been working under stress for a while now. Despite all the turmoil in the country, rates per square feet for residential apartments in the mid-segment and affordable housing category across branded players have not seen such volatility. That, in fact, is the main reason behind continued interest among potential buyers in this accommodation segment.

Taking note of the overall market scenario in the country, realtors have been very selective in their approach to undertaking residential project developments. While new project launches are being thought of strategically, there is an increased focus on selling ready to move in (RTMI) inventory. In fact, RTMI has become a preferred option and is gaining significant traction particularly from the end-users given the cost-saving advantages it offers.

The approach has worked well for established branded players and is expected to perform better as realtors are seeing increased buyer interest for RTMI units even during the ongoing lockdown period.

Source

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Axiom Landbase

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