Delhi NCR saw the biggest jump in prices, with Noida Extension and Greater Noida shooting up prices deftly (see chart). Despite the sharp increase, prices are still within reach in these micro-markets. A 2-BHK home of 800 sq ft would cost around Rs 34-38 lakh, which makes the property affordable for the middle income group. In Ahmedabad, the second city that has seen a double-digit increase in prices in the past one year, an 800 sq ft property in the most happening micro-markets will cost around Rs 40-48 lakh. It is about 10-12% more expensive than last year, but is still within reach of middle-class families in the city.
If you are thinking of buying a house, then this can be a good time for you. Property prices have risen steadily over the past year and home loan rates This has increased since the flurry of repo rate hikes this year. But although this has affected affordability, analysts say the slowdown in demand could push home prices higher in the coming months. Shishir Baijal, CMD, Knight Frank India, says, “The performance of the broader economy and changed buyer sentiment have a greater impact on market momentum as they determine the income level of home buyers and demand more directly.” Here’s a checklist that buyers should keep in mind when they plan what might be the biggest purchase in their lives.
Have you applied for a pre-approved loan?
Although real estate portals make it seem like a child’s play, it can take several weeks of intense research to focus on the right property. Hence, even when you are searching for your dream home, it is a good idea to get a pre-approved loan. Lenders give in-principle approval to the loan based on the borrower’s income and repayment capacity. Raj Khosla, managing director, MyMoneyMantra, says, “A pre-approved loan is useful because if the bank is ready to provide cash, it may be difficult for you to negotiate with the seller.”
A loan aggregator can help you find the cheapest loan. But be careful not to make too many home loan inquiries. “Loan inquiries are reported to the credit bureaus for verification of the individual’s credit score. Too many inquiries means that person is credit hungry and can downgrade your credit score,” warns Khosla.
Is the housing project registered under RERA?
The Real Estate Regulation Act (RERA) is a landmark law that protects the rights of the buyer and penalizes the developer for delays, structural defects and other deficiencies. RERA ensures timely delivery by preventing builders from channelizing funds to other projects. Check whether the project is registered under RERA. However, although all states except Nagaland have implemented RERA, not all projects may be covered by the law. Also, don’t rely only on RERA certification.
Experts say that the provisions of the law are not strict and enforcement mechanisms are manipulated and misused by builders. several home buyers Those who have ruled in their favor are not able to get the orders implemented. This is why you need to do your due diligence regarding the status of clearances and permissions and the title of the property. If you are buying property on resale, it is always a good idea to hire a property attorney and pay a small fee to check the property ownership papers.
Should you go for ready or under construction flats?
A major dilemma for buyers is whether to pay more for a ready-to-move-in flat or book an under-construction home at a lower price. Although expensive, a ready-to-move-in home removes any uncertainty of delay. You get immediate possession of the house, move to the new house and stop paying rent. If purchased for investment, it immediately starts generating rental income.
On the other hand, an under construction property is 15-20% cheaper than a ready-made flat. But there is also the uncertainty of delay. However, if you have done your due diligence and bought a RERA registered property from a reputed builder, that uncertainty is taken care of.
Do you know the actual area you are paying for?
You may find this unbelievable, but many people do not know how much area they are buying while booking a flat. Builders try to cheat the buyers by digging the super area of the project. But this super area includes common facilities like lobby, lift, stairs and corridors which are used by all the residents. These facilities can range from 20-25% of the super area quoted by the builder.
Built-up area is the area covered by a house. This also includes the area that is covered by walls and storage spaces. An owner actually gets the carpet area to use, which can be 60-65% of the super area. Make sure you know the carpet area of the property. As per the law, builders have to give a break-up of super built-up area and carpet area.
Can you afford the EMI?
When buying a home on loan, take the time to assess whether you can afford the EMI. Many people get emotional while buying a property and overburden their finances. Ideally, your loan to income ratio should be less than 35%. This means, all your current and planned loan EMIs should not add up to more than 35% of your net monthly income. In some cases, it can go up to 40-45%, but going beyond 50% is the road map to disaster. Lenders take this into account when they give you a loan, but borrowing further from other sources can increase a person’s overall liability.
Also, buying a home for self-occupation is different from buying a home as an investment. The first is a good idea as it creates an asset and frees you from recurring rent expenses.
The latter may not be such a good idea as you may end up paying 6-7% interest on the loan for a property that may not grow at the same pace. “If you are buying for self use, go ahead. But if buying a second or third home for investment purpose, think thrice before making a decision,” says Sanjay Agarwal, head, retail assets business of edelweiss ARC. Investing in a second or third home makes sense when prices were galloping at 20-25% in the early 2000s.
Now, property prices cannot rise faster than the cost of a home loan. It is also a good idea to go for as short a loan tenure as possible. If this is not possible immediately, try to increase the EMI amount every year in line with the increase in your income. Increasing the EMI amount can dramatically reduce the tenure. A 5% increase in EMI every year will reduce the tenure of a 20-year loan by more than eight years. Increasing it by 10% every year will eliminate the debt in less than 10 years.
Will fixed rate loan suit you more?
Considering the rise in home loan rates in the recent months, many home loan customers may consider taking a loan at a fixed rate instead of a floating rate. Fixed rate loans are about 100-150 basis points more expensive than floating rate loans, but they do not change. The prevailing rate for floating rate loans is around 7-7.5%, while fixed rate loans charge 7.9-8.5%. Understand the features of a fixed rate loan before signing up. Many fixed rate loans are fixed for only a few years before switching to the floating rate.
Do you have life insurance to cover the debt?
With around 60-70% of the property’s value funded by loans, you need to be prepared for unforeseen situations. Buy a term insurance cover equal to the loan amount so that if something happens to you, your family is not burdened with debt. When the pandemic was spreading, there were many cases where the sole breadwinner of a family died, leaving dependents with enormous liability. Aggarwal of Edelweiss ARC says, “Lenders treat such matters with empathy, but the loan cannot be waived off.
Lenders usually go ahead with a reducing cover tenure plan while granting the loan. But a regular term plan is a better way to cover this liability. This can continue even after the loan is repaid or if you switch to another lender. Also, loan linked insurance policies are usually single premium plans. These are not as cost effective as regular payment plans. A term insurance plan of Rs 50 lakh would cost no more than Rs 700-800 for a 35-year-old, while a 40-year-old would pay around Rs 1,000 per month. This cover should be more than your plan as a replacement for your income.
Delhi NCR Outlook
Major demand in Delhi NCR is driven by central segment localities such as Dwarka, Uttam Nagar and Rohini, because of their connectivity and proximity to employment centres. There are ample options in Greater Noida localities like Omega-Chi-Fi, Noida Extension and Tech Zone IV that cost under Rs 5,000. Interestingly, almost the entire supply of Omega-Chi-Fi is under Rs 5,000.
Kolkata Outlook
Major employment hubs of Rajarhat and New Town have a large supply of 2-BHK and 3-BHK units, which are preferred by home buyers. In addition, these and some other areas of north and central Kolkata are in high demand due to their proximity to the airport and connectivity with the rest of the city.
Hyderabad Outlook
Western areas such as Gachibowli, Miyapur and Kondapur, which are well-connected to other employment hubs such as the financial district in Hyderabad and HITEC city, were in high demand in the quarter due to reopening of offices and their connectivity with ORR.
Chennai Outlook
Homebuyers in Chennai prefer mid-segment and premium properties over affordable housing. Houses in the Rs 5,000-10,000 per sq ft segment are more preferred than the affordable segment. The affordable housing segment under Rs 5,000 per sq ft accounts for 33% of the total demand share and 34% of the supply.
Bengaluru Outlook
Eastern areas such as Whitefly Ald and Sarjapur Road, which are well connected to other employment hubs in Bengaluru such as Electronic City and Kanakapura Road, continue to be the most preferred localities for home buyers.
Mumbai Outlook
Western areas such as Andheri and Goregaon, driven by proximity to business hubs, airport, Western Express Highway connectivity, and Phase 1 Metro Lines 2A and 7 saw the highest demand and supply during the quarter.
Pune Outlook
Localities like Kharadi, Wagholi and Vadgaon Sheri, which are located close to the airport and employment centers are preferred by home buyers. The high demand has increased the average property rates in these localities.
Ahmedabad
Owing to excellent connectivity and rapidly developing infrastructure, Bopal and SG Highways remain the top two preferred micro-markets in terms of both demand and supply.
Most of the demand in Ahmedabad is concentrated in the western and northern micro-markets such as South Bopal, Shela, Gota, Thaltej and Bokadev as most of the commercial and residential developments are concentrated here.