When Satyen Joshi moved to Mumbai from Bengaluru five years back, little did he know that he would have to pay more than ₹50,000 per month as rent. He is now contemplating buying a property in the suburbs for around ₹2 crore. He has taken this decision at age 40 because he has the funds to pay up and may not have to take a huge loan for the property.
Despite an increase in home loan interest rates and rising housing prices, the overall sentiment in the domestic residential market remains positive on the back of robust demand with as many as 2.6 lakh housing units expected to be sold by the end of 2023, the highest number since 2008. The growth momentum is likely to continue in 2024 with sales likely to touch around 3 lakh units, a report by JLL‘2023: A Year in Review’ had said.
The report also noted that the housing market in 2024 is expected to remain buoyant and ride the next wave of growth and expansion with a good response from buyers in the mid and premium segment.
Despite an election year in 2024, demand drivers are likely to pave the way for a strong north-bound growth trajectory, the report said.
Strategic land acquisitions at prime locations and along growth corridors in cities are expected to strengthen the supply inflow across cities. Launch of diversified products to gain momentum including plotted developments, low-rise apartments, row houses and villaments.
Another report by Anarock has said that the top seven cities in India will see up to 33 per cent of average residential price hikes in three years.
Living on rent does not help to create an asset, while homeownership secures an asset. Simultaneously, other popular investment asset classes such as stocks and gold are volatile and unpredictable in pandemic times. Housing retains its value in uncertain times and eventually appreciates when times improve, and home loans come with attractive tax benefits. Rental housing doesn’t, said Anuj Puri, Chairman – ANAROCK Group.
Should you buy a property in 2024?
Given a choice, one should buy. “There has been growth in property prices and they are only expected to appreciate further,” said Pankaj Kapoor of Liases Foras, adding any time is a good time provided your finances allow you to make that purchase.
Can you afford an equated monthly installment?
Check your finances before you decide to buy a property. If you find that you do not have at least 30 to 40 per cent of the amount to be paid as a down payment, continue to stay on rent, advise a few experts.
Remember, banks will only fund 80 per cent of the cost. Those who already own a home can consider upgrading to a more spacious apartment.
Experts say that as far as possible and depending on your age, it’s always advisable to pay a sizable amount as a down payment. This is important because you may be able to service an EMI today but not so in the future if you do not have a job. So plan judiciously.
Also remember that property prices in established locations (areas that have matured over the last five to 10 years and there is a sizable population living there) are always higher than in areas where projects have been launched a few months back. Therefore, if there is an area that has come up recently and has good infrastructure, it may be advisable to invest in a property 10 to 15 km away. Better still, you may want to consider taking a house on rent in an area where you may invest in a project.
Choose the right location. Check if there are proper roads leading up to the project, enough shops for daily needs, and that schools and hospitals are close by. Check the distance to your workplace and the modes of transport available.
Ready-to-move-in or under-construction?
Decide on whether you want to buy a ready-to-move-in property or an under-construction one right away. If you have a sizeable amount to be paid upfront, you may want to buy a ready-to-move-in apartment. But if your budget is slightly stretched, you can consider a soon-to-be-ready project that is at least 80 per cent complete. There will be minimal risk of the project getting delayed. Make sure that the real estate project has received an occupancy certificate from the authorities and that flats are being registered.
Having said that, if you can wait and don’t have enough to pay upfront as down payment, you may want to go in for an under-construction property but make sure that the builder has delivered projects in the past. There are always more options available for under-construction projects.
“An under-construction project gives you an advantage of deferred payments. You can manage finances better presuming property is delivered in the next four years,” said Kapoor.
Should you invest in a residential or commercial property?
A few real estate experts are of the view that investing in commercial assets is better than residential property. “Investing in commercial assets makes sense as this asset class gives a steady rental yield of 7-8% and potential capital appreciation of 4-5%, totalling 11-13% versus a residential asset that gives a rental yield of 2% and low single-digit capital appreciation,” opines Abhishek Kiran Gupta, CEO and co-founder, CRE Matrix, a real estate analytics firm.
CRE Matrix calculated the returns of both commercial and housing asset class over a 10-year period and found that if an investor invested ₹10 lakh in a commercial asset, the value was 3X in 10 years and in the case of a housing asset, the value was 1.7x in 10 years.
In Mumbai and Delhi (given the cities have expensive real estate), it makes financial prudence to rent, he adds.
In other cities such as Pune, Noida, and Bengaluru housing is more affordable and thus buying makes sense. Having said that, buying a house is an emotional decision and Indians must have a house of their own, said Gupta.
Fractional ownership is yet another option
Given that investment in commercial real estate requires a high budget one can also consider fractional ownership.
Although, the concept of fractional ownership is in a nascent stage in India, and there are only a few tech platforms that offer such a model. However, it is gaining popularity among a few start-ups that are using technology to popularize this concept which has been successfully implemented in European countries and even the US. In the West, commercial properties or high-worth destinations or vacation homes are most popular. Through factional ownership, multiple investors are able to have combined ownership of any single asset, thus making it easier for investors to grab a pie of prime properties within the top cities in India. Thereafter, all investors can reap consummate benefits from it in terms of rental yield and capital appreciation, said Puri.
Should you invest in delayed projects where construction has now begun?
It should also be noted here that there have been a few projects such as those by the embattled developer Amrapali that are now being completed by NBCC under the court’s supervision. Many of these units are now being sold in the market. The Uttar Pradesh Cabinet on December 19 approved the recommendations of Amitabh Kant committee on delayed real estate projects, bringing relief to lakhs of aggrieved homebuyers who have been waiting to receive possession of their homes, some of which are stuck for more than a decade. This stock is also likely to hit the market in times to come.
According to Pankaj Kapoor, some of the SWAMIH-backed projects could also be an option available to homebuyers. Having said that, buyers exploring such projects should make sure that funding for these projects has been organized and construction has resumed.