There is some indecision among a lot of homebuyers right now.
And different, often contradictory, advice from different experts is not helping.
Is it the right move to buy an apartment now or should one wait for a better economic atmosphere? Is it prudent to make a long-term financial commitment to pay EMIs?
What are the pros and cons of buying an apartment now vs staying on rent for another year?
Let’s discuss these questions.
In fact, once you finish reading this article, the right course of action will be absolutely obvious to you.
So, without wasting any more time, let’s dive in.
Property Market Today
At this point in time, we look forward to the future with upbeat optimism.
The Indian economic fundamentals are solid and in spite of some difficulties, we are expected to emerge as the fastest-growing economy in the world.
Almost all sectors of the economy reflect this confidence and the real estate industry is no different.
All informed opinions suggest that the real estate sector is going to experience a period of robust growth from hereon.
Gradual higher sales in 2022 compared to 2021 confirms the upward trajectory of property demand in all markets of India, and Kolkata is no exception.
Homebuyers have overcome earlier uncertainty and fear and they don’t want to wait any longer to purchase their dream homes.
They are fully aware of the disadvantages of waiting for a better deal, They realize that the ‘better deal’ is available today, not some time in the future.
In fact, the demand for larger, 3 BHK homes are skyrocketing.
We must discuss why.
What is the compelling rationale for thinking so?
But before that, let’s get a better idea about the overall economic perspective.
Should We be Negative about the Indian Economy?
If homebuyers are not confident about the economy, if they are doubtful of income growth, or fearful of job stability, obviously they will be naturally hesitant to commit large amounts to a home purchase, especially when a home loan needs financial commitment to pay EMIs for about 20 years.
India’s economic stability confers that confidence to invest in high-value real estate.
Let’s quickly understand why prudent homebuyers have that solid confidence in the Indian economy right now.
As we have observed recently, inflation has become a raging monster that is the biggest source of worry for almost all economies of the world.
Although India is also tackling this monster, it is in a far more comfortable situation compared to large economies like the US and some European countries.
Everyone is confident that India will be able to fight and tame it and there will be no runaway inflation.
Consumer confidence is very high and some data point out this fact clearly.
- Railway passenger traffic surged by 92% in the first 6 months of 2022-23.
- FMCG sales volume saw a 15% hike YoY
- September saw the highest Passenger Car dispatch (92% compared to the same period last year) in recent times and it would have surpassed this figure had there been no chip shortage
- Recent incentivised sales programs on Amazon, Flipkart, and other e-commerce portals received humongous response
- The travel sector has come back with a vengeance
- The total outstanding home loan portfolio reported a growth of 10% in FY22 over last year
A majority of homebuyers buy homes on home loans in India. A home loan is a long-term financial commitment to pay EMIs. Unless there is confidence in the stability of the Indian economy, borrowers will think hard before taking such long-term liabilities.
At this point in time, there is no need to be despondent about the Indian economy while all commentators, even IMF and the World Bank, are gung ho about the Indian economy.
An Educated Guess about the Future
When you buy your home, you bet on the future. You are confident that financially, you will be stronger than you currently are.
You are certain that you will be able to meet all additional expenses in addition to the EMIs.
At this point in time, let’s try to guess what is in store for us in the future.
Is there any cause for worry?
Any dark clouds on the horizon?
Let’s look through the crystal balls in our minds.
As we have discussed in an earlier article, inflation is the enemy number one that can upset the economy.
Now it is clear that our fight against inflation will be prolonged and the RBI has sounded a clear warning to this effect.
Now, this sticky, elevated level of inflation has two disagreeable effects for keen homebuyers.
- Higher interest rates, and
- Property price increase (which may not be a bad thing after all).
Unfortunately, inflation is largely because of external factors this time. The RBI is also constrained to raise interest rates because of a variety of factors. The rate hikes by the US Fed is also influencing RBI’s approach.
What should homebuyers do under the circumstances?
Let’s discuss the best course of action.
What are the Benefits of Buying Properties Now
In an inflationary environment, some asset classes are depressed while a different set of asset classes are favoured.
As a general rule, high inflation and consequent high-interest rate regime depress the equity markets. As you can see, the stock markets came off their highs and are currently range-bound.
But money never sits idle.
It finds where it gets the best returns.
Some of the best returns are generated by hard assets.
Why?
Because in such situations, hard assets appreciate in value.
Real estate is the best hard asset to buy in a situation when there are heightened economic uncertainties. Property prices are absolutely certain to appreciate in this period.
Especially in India where real estate prices almost never come down.
And it’s an extremely safe investment.
Whatever happens, nothing is going to take your property away.
Is Waiting a Better Bet?
Of course, you can always decide to wait and make your move next year.
And stay another year on rent and tolerate all the silent humiliation every tenant faces.
Homeownership surely offers better social acceptance.
Apart from the compelling social and emotional factors in favour of home ownership, let’s also consider if there is any financial benefit.
Let’s remember that inflation is above 7% right now and hard asset prices are expected to rise in line with this.
Currently, the interest rate on home loans has risen about 2% from an all-time low.
If you wait before you buy your home next year, there is every possibility that the price of the same home will be 7-8% higher.
Clearly, there is no financial benefit.
Right?
What are the Experts Saying?
Experts say that you should never postpone your home purchase, especially if it is for living and not for investment. There is hardly any benefit of staying on rent.
Moreover, in a home loan tenure of 15-20 years, there are bound to be periods of low and high interest rates. Over a long period, interest rates average out and are actually far more tolerable than you initially think.
Even in this period when there are economic uncertainties globally, it is a good idea to invest money in your home.
Your home is your best investment.
