The real estate sector has had its fair shares of ups and downs over the last several years. Low demand, liquidity issues and accumulation of inventory were some of the factors that were acting as binding constraints on the sector’s growth prospects. This was followed by an increase in the unfinished projects which saw significant wealth of buyers, and builders get stuck. There were numerous interventions, some by the Finance Ministry, some by the Reserve Bank of India while banks too tried to revive the sector – but lower demand and reluctance of builders to lower prices emerged as key challenges.
The pandemic has, however resulted in many people revisiting their choice to buy a real estate assets. If you are yet to buy your first home and have a stable job then perhaps this may be an opportune moment for you to consider getting your home. Here are 9 reasons why you should contemplate purchasing a residential real estate property.
Due to accumulation of inventories over the last several years, builders have lots of ready to move in projects available across markets. Thus, you can buy a property and move in within a few months. This is important as most buyers take a home loan and have to pay EMIs while they wait for their projects to be completed. During this time many of them also end up paying rent on their existing property. Thus, by purchasing a complete ready to move – in home, they cut down on the rent expenses while waiting for the project to be completed.
Because of the accumulation of inventories and the pandemic induced stress, there has been major price corrections across top real estate markets in the country. In many cities there have been up to 30 per cent reduction in prices. Therefore, there are good deals available.
One of the reasons why buyers were sceptical of purchasing a home earlier was that they had witnessed a lot of buyers get stuck in unfinished projects for several years. This problem was largely solved with the introduction of RERA. There has been an attempt to strengthen the rights of consumers over the last few years and that should put to rest any apprehensions about purchasing real estate.
Even as commercial real estate faces several challenges, the residential market is gaining momentum across the world. Armed with stimulus checks and other such policy support, people are rushing to purchase assets – whether in the form of equity or in the form of residential real estate assets.
The sharp reduction in real interests’ rates has reduced the cost of home ownership. Given that most people purchase homes via mortgage loans, a reduction in rates implies a reduction in EMIs. Thus, in some places, EMIs are just marginally higher than the rent being paid by people. Therefore, it may be a better idea to purchase a home and pay a higher monthly outgo on EMIs rather than paying rent.
State governments in Maharashtra and Karnataka were quick to slash the stamp duty in an attempt to revive their real estate sector. The move has paid rich dividends as it has brought down the cost of ownership of homes. Combine this with the reduction in real rates and the price correction – and we get a sizeable reduction in the cost of ownership making it the most appropriate time to purchase a home.
There are substantial taxation benefits from owning a home. These fall under Section 80C, 24 and 80EEA of the Income Tax Act and can go all the way up to Rs 5 lakh of taxation benefits. Some of these benefits are also applicable for those purchasing a second home. It is worthwhile to consider these benefits and discuss it with the accountant to see the extent of savings that can be claimed for your tax computation by purchasing a house. These benefits combined with the low interest rates, pricing corrections and stamp duty cuts make home ownership an attractive proposition.
While rental market hasn’t picked up yet, but a second home can always generate a stream of income in the form of rent. Although, there are many other assets that may offer a higher rate of interest, but many may still prefer real estate as an investment rather than consider it as purely for consumption purposes. Many may also explore owning them as assets for purely speculative purposes. If indeed, the real estate market heats up then we can see some appreciation in the valuations over the coming few years. However, this is purely speculative and again, there are several other instruments with same (or lower risks) that serve as better investment options that give a higher return.
One of the most important reasons for getting a new home is to have a ‘Work From Home’ (WFH) compatible home. That is, many have realized that our present homes were not designed to keep in mind the prospects of working from home. As WFH gets normalised in the future, people are looking to move into a bigger home with adequate space for a home office. Thus, it makes sense to look for a WFH compatible home going forward.
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