Express press service

NEW DELHI: Buying a house is expected to cost more as there has been a substantial increase in the prices of materials such as steel, cement and iron. Experts say prices are still reasonable and now is a good time to buy a home for first-time buyers before prices rise further.

Several reports suggest that house prices will rise and some of the developers have already adjusted the cost to the project price, including Godrej Properties and DLF. But is this the time to invest in real estate?

Buy vs invest

Personal finance experts say that since prices have stagnated over the past five years, the time value of owning a home is good. However, most experts were not in favor of buying a second home for investment purposes, as residential properties are low-income assets.

Mumbai-based tax and investment expert Balwant Jain said: “One thing to keep in mind is that you have to buy a house when you have the money to make the down payment and you also have to be sure that one can pay the installments comfortably. “In the case of a second home, Jain suggests that one can also buy a second home for investment purposes as prices are low at the moment but it should be when they have excess money to make the down payment and also when they have the debit income to pay the installments.

Jain further suggests that one should not buy based on interest rates (whether they are currently low or high) because in a floating rate regime, rates fluctuate. Jitendra Salonki, a Sebi-registered investment adviser based in Noida, said: “The past year has been a great opportunity to buy a house as prices have been stagnating for years. First-time home buyers should definitely invest in housing. However, Salonki is not in favor of buying a house for investment purposes as it is a low return investment.
“You have to opt for equity instead of putting money on this (house) when you already have housing. However, one can look for opportunities in commercial real estate, which could offer higher returns. »

Low return on investment

Although the chances of rising real estate prices are high, most experts advise against committing a large amount of money to real estate for investment purposes. They argue that returns from investing in real estate could be limited. “I would not recommend buying a house for investment purposes because the return might not be very high, in addition there will be maintenance costs and if one wants to sell it is not as liquid as you would like your investment to be,” says Shweta Jain, CFP, author, Founder Investography.

Kunal Bhalla, co-founder and CEO of CRC Group, inflation has led to an undesirable rise in input costs and general project development expenses. “Sales and growth appreciation and market correction were long overdue, but if we look at the data for a decade from 2014 to 2015 in particular, rates have stagnated and there is no “So the correction was highly anticipated and the market is heading towards maturity.”

What is driving the real estate market?

Activity in India’s residential real estate segment has seen an increase in the first three months of 2022 as record high mortgage interest rates have fueled consumer enthusiasm, along with subsidy schemes sponsored by the government. According to a report by real estate consultant Anarock, home sales were the highest in the first three months of 2022 in the past seven years.

Home sales in the nation’s seven major cities rose 71% in the January-March quarter to 99,550 units from 58,290 units sold in the year-ago quarter. A report from online real estate major PropTiger.com, owner of Housing.com and Makaan.com, shows home sales and new launch numbers saw year-over-year growth between January and March 2022.

The report from the Gurgaon-based company shows that 70,623 units were sold in the first quarter of 2022, compared to 66,176 units sold in the first quarter of 2021, registering a growth of 7% year-on-year. The improvement in terms of new offering was significantly higher, with 50% year-on-year growth in new launches over the same period.

The report was based on data from Ahmedabad, Bengaluru, Chennai, Hyderabad, Kolkata, Mumbai-Metropolitan Region, Delhi-National Capital Region and Pune. The Confederation of Real Estate Developers of India (CREDAI), in a report released last month, said that residential property prices are expected to increase by almost 10-15% in the coming months as the costs of commodities have increased over the past few months. , following supply chain constraints due to the Covid-19 pandemic, which only worsened due to the Russian invasion of Ukraine.

Vikas Wadhawan, group finance director, Housing.com, said the spike in rates was between 4% and 9% a year. Price appreciation would be further aggravated by higher mortgage rates should the RBI raise the benchmark lending rate at its next policy review meeting in June, which may well be possible given the pressures. inflationary.

Sanjay Sharma, Group Director of SKA, said: “House prices may trend higher due to rising building material costs, which have increased overall operational costs for developers.