REAL ESTATE NEWS
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Purchasing House Still A Safe Investment
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The nation waits with bated breath for home loan interest rates to fall. The average Indian's dream of owning his own home is stronger than most other impulses. The only one that comes close to it is the desire to get married - and in actual fact, those two dreams go hand in hand, don't they?
It is true that interest rates have never been higher. It is equally true that there is little likelihood of them falling significantly in the near future.
Moreover, the magnitude of property prices in cities like Mumbai and Pune compound the dilemma. The current watch-and-wait game most buyers are playing is based on two assumptions:
Home loan interest rates will soon fall.
There will be a correction on the property market and property rates will come down too. What it boils down to is this - the average Indian has put his aspirations for a home on indefinite hold, assuming that lower property prices and reduced interest rates are just around the corner.
Is this a reasonable stance to take? Not really, in the first place, there is no likelihood of property rates in Mumbai, Pune and saturated cities like Delhi and Bangalore coming down. The demand is huge and the supply nowhere matches it. It is a seller's market and will remain one - at least for the short-to-mid term.
Secondly, we tend to misunderstand the dynamics involved in lending rates. The Government cannot arbitrarily lower rates, since they are linked to the global value of benchmark commodities like oil.
The pressures that the RBI is subject to are inflexible. It makes little sense to wait for home loan interest rates to ease before investing in something as important as a home for genuine self-occupancy.
It is highly unlikely that interest rates will ease in the foreseeable future. Considered along with the fact that property rates will not drop either, it is clear that the best time to buy one's first home is always now.
The flip side
Despite the soaring interest rates on home loans, buying a property is still among the safest investments available today. Vis-à-vis other instruments like bank savings, mutual funds and the stock market, property ownership continues to give the optimal value for money.
One should keep in mind that taking a home loan entitles one to income tax rebates, and the fact that one saves on monthly rental expenses. If the property is in a good location with sufficient appreciation potential, the borrower can at the very least break even on his investment within three to five years.
In other words - one can ensure that the value of the property eventually overtakes the cost of the home loan by buying the property in an appropriate location. The right location in this context would be one that is seeing a higher rate of development than others. Other value-additions are: The existence of major commercial or industrial landmarks in the vicinity Favourable connectivity of the area in terms of public transport
Source: The Economic Times, Anuj Puri, July 16, 2007
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