Is it the right time to buy a property?

Till two years back, no one really imagined that property prices could decline so much. That time it seemed almost unbelievable that realtors could actually offer so many discounts and freebies on properties. But it has finally come true.

As there has been an immense decline in demand for property among buyers, realtors are taking all kinds of measure to create a surge in demand. Big realtors are offering price cuts and discounts on properties and small and medium sized developers are offering freebies along with properties.

Recently, DLF announced 20% price cuts in Gurgaon housing projects. The company announced this move discourage existing buyers from defaulting on payment and induce new buying. Not only this, the company has also cut prices in Bangalore, Chennai and Hyderabad by almost 20%. In Bangalore, prices have been reduced to Rs 1, 850 per sq ft from Rs 2, 750 per sq ft.

While price cuts have been announced by biggies in the market, other developers are offering unusual freebies like a car free with a house. For instance, RDB Developers in Kolkata has made a recent offer of giving a Nano free with its new housing project. The company has decided to give the car ‘free' with a flat for its first 50 buyers. The company has booked around 50 Nano cars with Tata Motors for giving it free with flats in one of its residential projects in Sonarpur, South 24-Parganas. Another realtor in Kolkata took a similar step and is offering free car space with flats.

Besides the developers, government is taking equal interest in boosting the demand for housing. Not only they have declined interest rates but also prices by 10%. India's biggest lenders such as State Bank of India (SBI), HDFC Ltd., LIC Housing Finance, etc. have reduced their loan interest rates.

With property prices falling and with such enticements being given to buyers, is it the right time to buy a property or not?

As per experts, it is actually not.
Contrary to conventional wisdom, experts are of the view that this may not be the right time to invest in residential real estate market. Their advice is for both the first and second-time home buyers. As per a recent report from PropEquity, a firm that maintains data on real estate, in the first quarter of the current financial year, the Mumbai market saw an average correction of 42.84 per cent compared to the corresponding quarter last year. And, a report by Centrum Broking on Maharashtra Chamber of Housing Industry's exhibition said, major developers such as Kalpataru, Lodha, Rustomjee and Acme Group were quoting prices 20 per cent lower than their card rate six months ago. Godrej Properties had dropped the price it quoted for its Mahalaxmi project (Planet Godrej) by 34 per cent.
Not only in Mumbai, according to the PropEquity report, prices in other major metros too have seen a significant correction in the past six months. These areas include Gurgaon (24 per cent correction), Chennai (13 per cent) and Hyderabad (10 per cent) for the same time period. As per Mr. Hitungshu Debnath, executive director, distribution and wealth management, Angel Broking, "To begin with, the yields of residential properties are low. They are between 3-5 per cent only." He added that if you take a loan from a bank and expect the rent income to help you pay the equated monthly instalment (EMI), you will need to rethink the math. "The rent income along with property appreciation will not be able to cover even the interest that the investor will pay for the home loan in the first few years. This is called as opportunity cost in real estate. To get good returns, the buyer will need to hold on to the property for a long time, probably till the loan is repaid," says a property expert.
They also suggest that real estate prices are most probably going to remain stable for at least two years, that is, if the correction stops. But if you are still not convinced and want to go ahead with the purchase, wait for just another six months. They feel that by that time there will be some clarity on the economy as well as the real estate industry in this period.

Sukhpreet Kaur writes on behalf of 99acres.com, which is an internet portal dedicated to meet every aspect of the consumers needs in the real estate industry. It is a forum where buyers, sellers and brokers can exchange information. At 99 acres, you can advertise a property in India , search for a property, browse through commercial property and residential property.