Ghar Kharidne Ke Ache Din Jane Wale Hain
Der Na Ho jaye Kahin Der Na Ho Jaye!
Ghar Kharidne Ka Yahi Hai Mokka. Home Loan Rate, Aur Price Of Property Phir De Denge Dhokka.
COVID 19 was a devastating pandemic which destroyed our healthcare system, took away numerous lives, destroyed economies, took away jobs, shut down businesses, made livelihood difficult and ruined emotional bonds which one human shared with another. In other words everything was made weak and vulnerable.
The whole world got together to manage the human crisis. WHO, IMF, UN and the worlds large economies stepped forward in support humanity and the weak economies of developing and underdeveloped countries.
The Indian Govt proactively modified the policies to cater to the poor and the underprivileged, and to ensure that everybody could get the basic of food and healthcare attention.
Real Estate Industry which was under the weather, because of low liquidity, less take, policy delays, high interest rates, was in a crisis situation and COVID further made a huge dent.
Thanks to the government that decided to proactively step forward in tweaking policy to help the Real Estate Industry: Setting up of SWAMI fund to help stalled projects, extra 6 months granted for completion of projects, reduction in stamp duty or waiving by some state governments, extra benefits in income tax on interest burden on home loan, and over and above the RBI action of reducing the interest rates to a historic low to increase the affordability of the consumer and to help the developer to sell and generate the cash flow required for saving his business.
COVID crisis restricted the movement of people and work from home became the new normal. This further emphasized in the mind of the consumers the need to own a home.
Historic low home loan rates, coupled with low prices gave confidence to the consumers and also enhanced affordability, which saw housing sales not only pick up but also scale new heights.
The past 3-4 quarters have been exceptional as far as housing sales is concerned.
But ‘ready to move in’ inventory almost vanished, and inventory levels of under construction ventures of all developers came down drastically. The branded developers saw massive uptake in sales.
REALTY REINVIGORATED post COVID 2
While we all have been enjoying the joy ride for some time, now it seems the party is going to take a pause.
Inflation levels across the globe are extremely high and not sustainable any more. The excess liquidity has to be pumped out of the system and the only way this can be done is by hardening – increasing interest rates.
I will not be surprised if even while writing this note I read that RBI has increased interest rates by 40 BPS, and FED in USA has also increased rates by 50 BPS.
RBIs action will take away 90,000 crore out of the system.
All banks have increased home loan rates and there is a definite expectation of RBI further increasing interest rates in June by 75 BPS, which will force banks to further increase home loan rates.
This is bad news for the consumers as their EMI : Equated Monthly Installment will increase and hence monthly budget will be disturbed.
AND THIS IS NOT ALL
Raw material prices such as of metals, cement etc have been continuously increasing in the last one year, which has forced the developer to increase housing price (between Rs 500 / sqr ft to Rs 1000 / sqr ft) to keep the project feasible. The consumer has to pay extra for the same apartment in this new regime of increased prices.
The developer is also hit since his cost of funds is set to increase with increase in interest rates, and hence he will have to further increase price of his inventory.
The consumer’s affordability is bound to take a hit which will result in reduction of velocity of sale.
We may be caught in a vicious circle
Prices increase because of material costs & interest rates – as a result affordability of customer comes down – sales drop – investors exit – cash flow of developer gets hit and yet again we are forced to reach the stage of stress in the industry.
I see this coming
I humbly request the developer to go ahead and sell as much as is possible, and not wait any further for prices to increase.
I also suggest that the customer takes this opportunity to buy his home, while the interest rates are still low and prices are moderate.
Der Na Ho Jaye Kahin Der Na Ho Jaye.