With lowest interest rates ever, best time to buy a home

A recent study by Anarock states that residential real estate is the best investment option during this crisis largely due to lower risks attached.

ET Spotlight
The famous saying by Suze Orman, “Owning a home is a keystone of wealth… both financial affluence and emotional security” is currently quite a top of the mind notion. While it has been a common desire amongst many to be a home-owner, but somewhere had taken a back seat in the world of choices of being adventurous and spending on extravagance. Living in unprecedented time of the COVID 19 pandemic, there is a growing acceptance that home-ownership brings stability and security for family, when compared to other investment options. Now when people are grappling for job and security, having a home of your own and not having to pay rents (that is futile and no asset building occurs) is way more secured. So clearly, home has become an integral part of lives and a tangible investment unlike other asset classes, further accelerating the trend of buying.

There is already a growing desire of owning a home as consumers look at it as a necessity now. Also a recent study by Anarock states that residential real estate is the best investment option during this crisis largely due to lower risks attached. Additionally, a public poll that was conducted by a finance and digital expert on Twitter revealed 76% of the respondents choosing the safety of a home over other asset classes. All these put together, are definitely a testament to the growing interest of owning a home in the country.

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There is vast chatter on affordability and livability. Speaking of affordability, it is not just the price of the unit but also at what price do you get to financing buy it. 25 years back, home loan rates were in excess of 10%. Now, with RBI slashing the repo rate by 40 basis points (100bps=1 per cent), the repo rate is now at an all-time low of 4 per cent. The RBI has slashed the repo rate by 115 bps ever since the lockdown has begun, which is great news for home loan borrowers who want to purchase their dream house. Interest rates are now headed downwards, thereby reducing EMIs and making home ownership increasingly affordable, EMI has gone down to almost 7.5% and it may go down further.

With the cheaper rates and the availability of 80-90% loan amount sanction this is the right time to take a home loan and buy the house that one always wanted. Buying a home is in effect building a high sense of comfort for yourself and your family. With interest rates at all time low, it allow considerable amount of savings or one could look at a larger / spacious home without any increase in EMI outflow. On the other hand, a borrower can use the saving resulted from reduced EMI to avail of a top-up loan, which is also available at a lower interest rate. This allows the buyer to furnish his/her dream house and make the purchase complete. Given these factors, the affordable and mid-segment will emerge as the most preferred category in these times.The survey by Anarock also suggests that 36% of home buyers would prefer the affordable segment while 37% would opt for the mid-segment. Also with the labour issues in the market there is an expected delay in under-construction projects, resulting in consumer inclination towards ready home which is absolutely risk-free.

The current home loan scenario also comes with another benefit. Borrowers can now look at the possibility of going for a fixed rate over a floating one. The latter tends to get volatile and can go north based on monetary policy decisions by the RBI. Hence, opting for fixed rates home loans is the perfect option at this time when rates are at their nadir. There is more for buyers looking at property for investment purpose. One can now earn rental income, which is currently pegged at 2.5% of capital value in a metro city such as Mumbai. With home loans in the region of 7.5%, the net effect, if a home is purchased for letting out comes to 5%. This is another win-win situation, which ensures that you are ahead of inflation because of the neat combination of various factors working in your favor while looking at buying a home for investment purpose at this time.

Not stopping at that, many reputed developers are burnishing the available benefits with additional offers and value additions, making the purchase a good deal for consumers.For example, the “Apna Ghar Apna Desh” initiative by a reputed developer wherein consumers get an additional rebate of 1.5% on top of the already low home loan interest rate will lead to considerable savings via substantial reduction in EMIs.

For most aspiring home-buyers, it is a once in a lifetime moment as well as may be the only biggest financial commitments of their lives. Looking at the current market scenario, it is predominantly a buyer’s market to make the investment and fulfill the dream of owning that dream house.

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