Should you buy a property now?

Thu, 14 Aug Pre-Open

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Property buyers have faced several problems while buying their dream home. They have often been lured with promises of luxury, amenities and prospects of price appreciation. However, the reality has not always measured up to expectations. We have all heard stories of buyers being misled by developers. Project delays, poor quality of construction, price escalation at the time of handover and legal issues are just some of the problems faced by the common man. However, the biggest complaint has been the property prices itself. Developers have refused to reduce prices hoping for better days ahead. This has led to a huge build up of inventory in metros. While prices may no longer be rising fast, it has not shown much of a correction either.

In this context, a recent article in the Business Standard caught our eye. The article suggested that it may be a good time to start scouting for residential property. The reasons given were quite intriguing. Apparently developers want you to believe that property prices will start rising soon. Thus you should book your flat before the price appreciates. Developers say that post the festive season in October-November, discounts and freebies currently being offered may no longer be available. Also, if the stock markets continue to rise, large investors may book profits in stocks and invest in property leading to a rise in prices. In addition to this developers believe that the Reserve Bank of India (RBI) may have completed its cycle of interest rate hikes and the next move by the RBI will be a cut in rates. This will mean lower EMI payments next year, for all those who book a flat now.

We believe that none of these reasons should influence your buying decision. Simply put there is no 'right time' or 'good time' to buy a home. The major factors that you should consider are affordability, location, quality of construction, the approvals/paperwork and the reputation of the developer. Never should you buy a home based on the possible direction of interest rates or the stock market. Such strategies are quite risky as nobody can predict market movements. Also, buying under construction property is fraught with risks. Prospective home buyers should not be influenced by offers and marginal discounts. When buying real estate to is always better to be safe rather than sorry.

Do you think that you should buy a home based on the near term outlook on prices? Do share your views on the Equitymaster Club.