Purchasing A Home In 2017: What Does This New Year Offer?

A surprising twist towards the end of 2016 with the Indian government Demonetizing 500 and 1000 currency notes to curb black money, fake currency, destabilize terror financing and end corruption is likely to presage some dramatic changes in 2017 for the real estate sector. The demonetization initiative by Central government actually means further delay in the on-going real estate projects due to a huge cash crunch, but the move has paved way for buyers planning to purchase a home in 2017 with a cleaner and transparent transaction.

Real Estate Developers will have to find alternative funding source while investors would hold back for more certainty before taking a decision. While many predicting the property rates to fall by 25-30% following the current demonetisation, buyers are just concerned if the market will morph more favourable to their interests. Let’s delve deeper into the impact of demonetization on the real estate sector for short and long term. Here are 5 things to watch for in real estate industry in 2017:

Drop in Home Loan Rates

declining real estate prices

Due to the demonetization move, banks are witnessing a huge inflow of cash deposits, which in turn is giving banks more manoeuvrability in delivering loans. Practically, with huge deposits, banks will have more liquid funds in bank reserves and by reducing the home loan rates banks can channelize the liquidity. Further, the government is in favour of using the money recovered from demonetization to launch a housing scheme that would offer a significant discount to existing home loan rates. Some sources also say that government will soon come with a scheme with cheaper home loan rates of 6 to 7% versus 9% of today’s average rates.

Easier EMIs

easier-emis

If you have been delaying the home buying process because of high EMIs, you can now expect some breather. This is because high deposit growth tied to weak credit growth would facilitate top banks to bring down the interest rates. Lower lending rates would simply mean lower EMIs on loans. So, in case you want a home with lower EMIs, the first quarter of 2017 would be a perfect time.

Perkin Home Loan Eligibility

perkin-home-loan-eligibility

In India, cash component pertaining real estate is estimated at 25%. The cash component typically remains higher in a land transaction, while it is lower when purchasing a flat or apartment. Post demonetization, the cash transaction will reduce notably, paving way for salaried customers that are looking to buy property using cheque transactions. Banks fix the home loan eligibility on the EMI paying capacity of the borrower which is however limited to 75-90% of the property value. Financial institute and banks do not consider cash component while giving a home loan. Hence a drop in cash component and rise in cheque component will improve the overall loan eligibility for the borrowers, especially the first time home buyers.

Property Price to fall by 20-30%

Investing in property has long remained a safe haven for fencing the black money in our country. The onslaught of black money and demonetizing the larger currency notes (Rs 500 and 1000) will probably bring constraint for a further supply of black money to property markets. This will result in property price to fall at least by 20-30%. The fall may vary by location and property type; however, this will benefit the end users that are looking to buy a home at affordable price.

For buyers looking purchasing a home in 2017, this could be a great chance to get a deal, particularly in ready projects, as real estate prices are expected to drop and a few sellers would agree to negotiate the price on their housing units. With lower loan rates and lower EMIs along with longer tenure, “Achey din” are already here for home investors.

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  1. January 5, 2017

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