Real Estate bubble or Property bubble is a tricky term, especially in a country like India. Those who were able to buy a property at the right time and according to their perceived value, think that the property bubble has gone burst, while those who missed the bus think that their time will come as the property fizz is about to rupture.
The builders have been smart in selling their properties to the end users. The psychological marketing tactics are adopted by them to make a potential customer rush for panic buying. These tactics include sending messages of rate revisions, future scarcity picture for homes, property fests, and additional discounts.
Though the theory of ‘Let the Buyer Beware’ holds well here, yet it has been seen that property markets have a lot of grey patches, which even a vigilant customer sometimes misses to see. In the middle of all this, there are genuine builders as well, who sell their produce at right prices. However, in a hush-hush, to search for a value buy it is difficult to find such sellers.
Is the market very expensive at the moment?
The answer lies somewhere in the middle. Some pockets of the properties have good discount offers and the potential for getting a good deal there is higher. This is especially true for properties in the range of Rs 40 lacs to 50 lacs. The buyers of these properties are mostly missing. The cases of loan defaults have seen an increase after the revision of rates on the upside.
Loss of jobs and increase in salary cuts have been the culprit behind the rise in defaults. In such scenario, builders are offering handsome discounts and a thorough search can bring you very near to your dream home. However, these discounts are not given by slashing the actual cost of the property. This will send negative signals for the entire realty market. The discounts are in the form of some or the other freebies. A person has to check whether these discounts are worth taking.
Interest rate woes:
The interest rate woes continue. The loan rates have been revising higher and range between 10.25-11.25%. Even as some of the banks are offering waver in documentation charges, the real rate of interest is still hurting the investors.
What you should consider?
Most importantly, do not purchase a house because other is doing the same. You should first analyze your own situation (Finances). The vital questions are – how will you be able to meet the requirements of installments? How much amount you will have to deposit initially? Are you comfortable with the current interest rates?
The philosophy due to which many people are lured towards an own property is the exorbitant rentals of houses. A rent for two BHK flat in Delhi and NCR region in a good locality, and close to a metro station is costing anywhere between Rs 15,000 to 18,000. While if you had taken a loan of say Rs 21 lacs, similar would be the EMI of the loan. The situation in Mumbai and Banglore is more severe, as the rental for 2 BHK is nearing Rs 50,000-60,000 in some key areas. People think that instead of enjoying a marginally lower differential or paying a higher rent, it is better to purchase a flat.
It is a game about capacity at the moment in India. The people with high holding capacity are investing in realty, while the builders are playing smart game. They are focusing on the segments from which there is demand. The other projects that are prone to interest rate appreciation are getting delayed.
A middle class customer should therefore be ready to tackle builder psyche, his own aspirations, financial capacity, home loan rates, and rentals in case the invested project gets delayed. This is a big bubble which sometimes becomes too large to handle. Transparency deficit has always been a destroyer for faith in this market. Step on the ladder of real estate when you are able to tackle these bubbles!!