Invest in Credit Risk Mutual Fund or not?

RBI’s House Price Index data shows that the housing sector has lost its sheen as there has been a near-zero growth since the last decade. According to the data, in FY11, the growth in the sector was around 23.1%, which came down to 7.3% in FY16 and 2.8% in FY20. After the covid year, the sentiments did not go positive either as the growth for Q3FY21 is recorded at 0.2%.

One year after the pandemic, the State Bank of India’s minimum home loan rate surged from 6.70% to 6.95%. This is when the housing prices are still unaffected. Is it the right time to buy a residential property in the current scenario?

Santhosh Kumar, Vice Chairman, Anarock says, “Home loan interest rates are at a 15-year low. Coupled with the bottomed-out property prices and additional discounts and offers by developers, there are very real savings to be secured on life’s most cost-intensive investment.”

“Developers have pulled out all the stops to attract buyers. Extremely lucrative offers have been rolled out during and after the festive season, many of which resulted in an actual reduction in the cost of acquisition – ranging between 5-15%. These offers come with an expiry date – when the housing market regains enough momentum, they will be withdrawn. Buyers can thus save on the overall property cost,” he further added.

A few states like Maharashtra have kept their circle rates also unchanged to stimulate the real estate market.

Prices at lower end

Even while end-users shouldn’t try to ‘time’ the real estate market, but it is quite evident that property prices are at their lowest best. There have been no changes in pricing on the primary (purchased new from developers) market for the last few years. Even the pandemic hasn’t caused them to reduce significantly as anticipated. Buying now equals buying at the lowest possible price.

“There are a lot of options in the market, even in ready-to-move properties. Moreover, prices of RTM properties are almost at par with under-construction homes in many areas. This has never happened before – and since developers have curtailed new supply, it is unlikely to happen again. Never have homebuyers had such a tempting choice range, at such low prices,” Kumar said.

He further added that the affordability of homes is at the all-time best and estimated to be 27% in FY21 for mid-income homes. Thus, buying a home now, while the cost of acquisition is so low, is good for buyers. We can reasonably expect the market to turn the corner in 12-18 months when property prices may harden, and asset appreciation begins in all seriousness.

While talking about the repo rate being unchanged by the RBI, Lincoln Bennet Rodrigues, Founder and Chairman, Bennet & Bernard Group said, “While the real estate industry always aspires for reduced interest rates, the decision of RBI to keep the repo rate unchanged is understandable at this juncture and will make sure that home loans will continue to remain at attractive rates and this should augur well for home buying sentiment. Residential demand is reviving in the pandemic context and this needs to be fostered.”