Is This Right Time To Buy A Home?

For those looking for more affordable options, purchasing an under-construction property could be a smart move, as these generally cost less than ready-to-move-in properties.

India's residential real estate market is witnessing a remarkable surge.

According to data from real estate consultancy Anarock, property prices across the top seven cities have risen by an impressive 46 per cent between the third quarter of 2021 and 2024.

The past year alone has seen an average price increase of 23 per cent.

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Key drivers behind rising prices

Several factors are fuelling this upward trend.

"The price growth is mainly due to an increase in the prices of construction raw materials and an overall rise in demand," says Santhosh Kumar, vice chairman, Anarock Group.

Steady income growth over the past three years has also given buyers the confidence to invest in property.

"It is providing households with the comfort to commit to a big-ticket purchase like a house," says Vivek Rathi, national director of research, Knight Frank India.

While recent price hikes may appear sharp, they are more moderate when viewed over a longer period.

"Over a 7 to 10-year period, property prices have grown at an annualised rate of 6 to 8 per cent," says Vikas Wadhawan, group chief financial officer, Housing.com and Proptiger.com.

He notes that property prices tend to increase in spurts rather than steadily.

"This time, prices had paused for a longer while, which is why the increase in the past few quarters has been sharper," adds Wadhawan.

Kumar further points out that structural changes in the Indian real estate sector--such as demonetisation and the introduction of the Real Estate Regulatory Authority Act, 2016 (Rera)--had kept prices stagnant, making the recent surge overdue.

Should homebuyers buy now?

For most end users, property purchases are long-term commitments.

"If the commitment is for 15 to 20 years, then buyers should close the deal without waiting for the right price," says Rathi.

The price rise is expected to continue, though it may not be as steep as over the past year. Not much may be gained by waiting.

Real estate cycles tend to be long. The current up-cycle, which is three to four years old, could continue for a few more years.

"Now is the best time to buy. Genuine buyers with the financial means should not wait any longer," says Kumar.

Assess your financial readiness

When deciding on a budget for a house purchase, consider other major financial goals, such as retirement and children's education.

Buyers should evaluate their funding options, including using savings, selling other real estate (and availing tax advantages), and taking a loan.

EMI should not exceed one person's take-home salary (even in a double-income family). It is also crucial to have emergency funds in place.

"If you are a double-income family, have at least three months of emergency funds plus six months of equated monthly instalments (EMIs). If you are a single-income family, have six months of emergency funds plus 12 months of EMIs," says Vishal Dhawan, chief financial planner, Plan Ahead Wealth Advisors.

Strategies for buyers

To avoid overpaying, buyers should carefully research the market.

"Compare the price of the property you are considering with similar properties in the vicinity.

"If the target property has a higher price tag, check whether it offers superior features and amenities," says Vimal Nadar, head of research, Colliers India.

Another strategy is to consider buying a smaller property to stay within budget.

Alternatively, buying a home in a peripheral area could be considered, although Rathi advises caution in such cases.

"Avoid areas where physical and social infrastructure are still underdeveloped," he says.

Remember that resale could be more difficult in such locations.

"The location should be within a reasonable distance from both your and your spouse's workplace, as well as your children's school or college. Additionally, access to healthcare facilities for the elderly should be a priority," says Wadhawan.

For those looking for more affordable options, purchasing an under-construction property could be a smart move, as these generally cost less than ready-to-move-in properties.

"If you choose an under-construction property, opting for a branded developer will reduce risk," says Kumar.

Rathi also suggests selecting a project where there is some visibility on its completion. However, buyers should be mindful of the risks associated with under-construction properties.

"Completion could be delayed. Many of the promised amenities may not be delivered or may be delivered with a delay," cautions Dhawan.

Mistakes to avoid

In the current climate of rising prices, it is easy to rush into a decision. However, experts advise against hasty purchases. Ensure the project has all the necessary approvals from Rera.

"Verify the project details on the Rera Web site," says Nadar.

Additionally, seek the services of a property lawyer to review the ownership papers.

Finally, buyers should stick to their budget in this market.

"Do not commit to premium or luxury projects that do not add functional value," says Rathi.

Developers often introduce unnecessary bells and whistles to inflate prices, but these features may not significantly improve the property's overall utility.

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Disclaimer: This article is meant for information purposes only. This article and information do not constitute a distribution, an endorsement, an investment advice, an offer to buy or sell or the solicitation of an offer to buy or sell any securities/schemes or any other financial products/investment products mentioned in this article to influence the opinion or behaviour of the investors/recipients.

Any use of the information/any investment and investment related decisions of the investors/recipients are at their sole discretion and risk. Any advice herein is made on a general basis and does not take into account the specific investment objectives of the specific person or group of persons. Opinions expressed herein are subject to change without notice.

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Feature Presentation: Ashish Narsale/Rediff.com