The Coronavirus pandemic has been declared to be a global health crisis. It has had significant impacts on the economy of the country and the real estate market is also bearing a massive blow. However, the market experts are of the opinion that this can prove to be a positive time for homebuyers who can negotiate good deals over properties. They can also benefit from an all-time-low interest rate of 7.15-7.8 percent on home loans.
The COVID-19 lockdown enforced in India has accelerated the use of technology-assisted home buying in India. People can now inspect properties online before finalizing any deal. Virtual site visits have become a reality and a lot of property selection and purchase can be done digitally.
Some states are planning to encourage the e-registration of property documents which would further bring down ease the property buying process. Although the real estate market has received a jolt due to the current pandemic, many positive measures have been taken by the government to offer relief to the real estate market segment and for the home buyers.
Fallen Property Rates
As per a survey conducted by Magicbricks.com, the prices of properties in large metros have fallen by 2 to 9 percent after the announcement of lockdown. This can be a great opportunity for homebuyers who are planning to purchase their own property. The prices can get better in the coming months. In yet another survey, the real estate buyers are hoping for a price correction.
There has been a considerable decrease in the property rates in all the prime cities of India due to coronavirus.
As per the recent Property Buyer Sentiment survey by Magicbricks, the post-COVID-19 change in property prices in Mumbai has been -2%. The change has been -5% in Bangalore real estate and -7% in Ahmedabad. Hyderabad has witnessed a massive change of -9% in the property price.
RBI’s decision to cut the Repo Rate will drive more Home Loans
What is further driving this trend is the decision by the Reserve Bank of India to slash the Repo Rates by 0.75 points. Repo Rate is simply the rate at which the RBI lends money to commercial banks. So the reduced rate will benefit the bank customers who are loan seekers.
This decision has made housing loans a pretty lucrative option for home buyers. This steep cut has lowered the interest rate on home loans by both private and public sector banks between 7.20% and 8.05%. This is incredible news for those who are chasing their goals of owning their own house and had been waiting for the right time to make a move.
A slash in interest rate means considerable savings for an individual who is planning to create an asset either for the purpose of investment or for their own use. Moreover, a borrower can use the savings from the reduced EMI to request a top-up loan if needed.
Extension of Credit Linked Internet Subsidy Scheme (CLSS) Deadline
Those who nourish their dream of having their own house have another reason to rejoice. The Prime Minister Awas Yojana (PMAY) scheme was launched by the government for assisting individuals in urban areas with subsidized home loans.
As per the scheme, financial assistance is offered by the government to eligible candidates based on their income slabs. The last date for submitting the application was earlier March 31st. However, the deadline has been extended to March 2021.
This bracket has opened a window for individuals who haven’t yet applied under the CLSS scheme of PMAY. Homebuyers residing in urban areas would be eligible for interest subsidies on loans. Individuals belonging to the middle-income group are eligible for subsidies up to ₹2.67 lakh based on their income slab.
A Great Time to Own a Property
It is the best time to clearly decide whether you are looking to own a property for self-use or for the purpose of investment. The lockdown has slowed down the housing loan approval process from financial institutions. The process of verifying the repayment capacity and the credit history of a lender is taking longer time than usual.
There is also a possibility that many repossessed properties would soon enter the market in the next few months. As lots of individuals have suffered job losses and salary cuts, the ones with hefty loan commitments may not be able to repay their EMIs.
All borrowers have been offered a three-month moratorium as per the RBI guidelines. If the borrowers default on loan repayments, then the properties would be seized and auctioned off. The possibility of such properties entering the market segment again is too high considering the current situation.
The price of auctioned properties is usually 20-30 percent lower than the prevailing market rates. However, such properties are usually embroiled in loans, legal disputes, or may have unpaid bills on them. Once such properties are purchased in an auction, the buyer is responsible for settling outstanding dues and additional expenses.
You can take the help of a property consultant for evaluating the actual worth of your investment. Also taking help from a property lawyer for studying the documents and ownership papers will help you estimate the actual cost of an auctioned property. A professional would be able to distinguish if something is missing or not.
The COVID-19 pandemic has created a great opportunity for homeowners for investing in a property right now. Nobody is keen on investing their hard-earned money into anything that seems volatile. However, people are always inclined towards fixed investments such as real estate.
Investing in a property by availing a loan is being viewed as a much better and safe opportunity that will hold value despite a downturn. It is best to invest now if you are hoping to gain returns in the next five to eight years. It would also be better to invest in commercial property. This is because the rental yield of a commercial property is usually higher than that of a residential property.