A home is perceived as a tangible, prudent and relatively safe investment instrument that provides vital security and stability. The huge housing shortage in the country, increasing number of nuclear families and rising population, mean that the demand for new properties will continue to grow. Moreover, with the softening of interest rates, home seekers are likely to find it more affordable to make a purchase.
“Strong end-user demand across key markets and healthy sales offtake across both, existing and recently-launched projects, should strengthen the ecosystem and restore consumer confidence in the near future. Reducing interest rates should further boost demand for residential real estate in the coming years. All these factors, together with the current demand-supply gap, augur well for real estate as an investment asset,” says Sunil Sharma, VP-CRM and marketing, Mahindra Lifespace Developers Ltd.
Main advantages of opting for a new property
Growth in India’s real estate sector, has typically been driven by demographics – a fast-growing population and urbanisation, resulting in an ever-increasing demand for new home, especially in the economic and commercial centres which have good job-creation prospects. Nevertheless, when it comes to demand for homes, new properties may find greater preference over resale homes, according to experts. The reasons are:
- Greater flexibility vis-à-vis finance and home loan tenure.
- Better resale value prospects.
- Easy documentation.
- Latest amenities.
Financing options for resale and new properties
If the property is new, then, the home buyer can opt for a tenure of 20-30 years on a home loan. However, if we take an example of an old property (say, 40 years old) and the housing finance company (HFC) does not offer home loans on properties that are more than 50 years old, then, the tenure will be limited to a maximum of 10 years. This will have an adverse effect on the equated monthly instalments (EMIs), which will rise due to a drop in the tenure.
Buyers also stand to gain, if they buy houses in projects launched after July 1, 2017, adds Aniket Haware, managing director of Haware Builders. “Although a 4.5 per cent service tax is being swapped by a 12 per cent Goods and Services Tax (GST), the gain is that a number of hidden and cascading taxes will be removed under the new regime. Developers will also get numerous tax credits under the GST, which they have to pass on to the buyers,” Haware elaborates.
Availability and property prices
Resale properties have their own set of restrictions. Due to the limited availability in the market, customers will rarely get a flat as per their expectations and Vastu compliance. This is a major hurdle, as customers usually purchase their dream home with a long-term perspective.
Moreover, many resale properties available in the market, may have been purchased at a time when the home loan interest rates were more than 10 per cent and property rates were on an upward trend. So, the property would have been bought at an expensive level, as compared to current property rates. Now, the interest rates have come down to 8-8.5 per cent and the real estate market is more transparent.
Prices are realistic and developers are willing to reach out to customers directly. Therefore, home buyers may be able to get a better deal by negotiating with the builder to buy a new home, as compared to a resale property.