Every asset class, be it equities, mutual funds, gold or for that matter even real estate, experiences its share of volatility. However, that does not mean one should restrain from exploring them. All that is required is making a smart and informed decision while choosing wisely when building the portfolio of assets.
As an asset class, real estate has its own charm. While buying an apartment as against renting or leasing is a never ending debate, both approaches have their benefits at different stages of life. The rationale behind paying a monthly rent and having the flexibility and freedom to move from one neighbourhood to another seems logical during early years. However, there always comes a time when owning a house outweighs leading a nomadic lifestyle.
The very fact that the individual home loans segment has remained steady despite a challenging economic environment speaks volumes about the attractiveness of real estate as an asset class. Validating the trend are some of country’s leading private sector banks with higher double-digit year-on-year growth in their individual loans category during the September 2019 quarter. This, despite a larger home loans base in the corresponding period last fiscal.
So, if you have already decided on the life goal of owning an apartment in 2020, I suggest start with understanding the art behind the science of buying a house before taking the plunge.
Let me take you through some of the key aspects that will ensure a seamless experience.
Financial assessment is the first step in this journey and a very important one. Since, buying an apartment is among the most expensive transactions in an individual’s life, a proper financial assessment is very crucial. Compare your reserves and earnings with expenses, outstanding loans and other liabilities (if any) to get a clear picture about your finances. Checking with the bank, you already have an account in, and researching online for eligibility and a pre-approved home loan will give you a better understanding of the apartment sizes and price range. This exercise will also tell you the extent of own contribution required or to be organised for the transaction. Additionally, adding an earning family member and availing a joint home loan will help increase the eligibility.
Location, scope of the project and development, connectivity, quality of life, existing and upcoming social infrastructure, pricing and rental trends, and future prospects are some of the key aspects to be looked at when conducting a property search. Start with secondary research gathering information about projects and developers in your identified location/ market through online resources, real estate forums, property exhibitions and even brokers.
Of late groups onsocial media channels like Facebook, Twitter groups are playing a crucial role in gathering market intelligence as well. Assistance can be sought from your lending partner as most of them operate a property search vertical as a value added service. Follow this with primary research comprising a recce of the area and site visits to get a better understanding of the ground reality. This is also where financial assessment comes handy. Knowing the price range beforehand helps narrow the search and the type of the apartment (1BHK, 2BHK or 3BHK depending on your requirement) that can be looked at in the specified budget.
The implementation GST and the Maharashtra Real Estate Regulatory Authority (MahaRERA) have, to a great extent, made it easier for potential buyers to find concrete details of projects being shortlisted in the location of choice. While market dynamics and competition has forced stand alone local developers to offer quality housing, going for projects undertaken by reputed real estate companies with a commendable accomplishment is always reassuring.
Both types of properties have advantages and the buying decision depends on the buyers. An under- construction property also allows the buyer to look at a bigger apartment in the specified budget, in case there are more members in the family. While there are project completion risks associated with under construction developments, SBI’s newly-launched home buyer finance guarantee scheme could help mitigate it to a great extent.
Opting for a ready to move in (RTMI) apartment offers more advantages though, even if you are planning to put it on rent as opposed to moving in with your family. One is able to closely examine the project offering, quality of construction, basic amenities and other lifestyle facilities that are part of the project in addition to the overall look and feel of the development. With an RTMI apartment, there are other advantages that an under construction property will not offer. With RTMI, you will save on GST and earn rental income (if you have bought it for that purpose) immediately after taking possession
A home loan will typically give between 80 per cent and 85 per cent of the funds required for purchasing the apartment. You will have to bring in the balance 15 per cent to 20 per cent depending on the financial institution providing you the home loan. Provisions will have to be made for additional expenses to be incurred over and above the cost of the apartment being considered for purchase. If looking for a higher loan amount you can consider a top-up facility.
Financial institutions tend to bundle a home loan insurance product when funding your purchase and it is a good thing to have one. However, it is important understand the details of the insurance product and the purpose being served. Do make a cost – benefit analysis of the insurance offering and compare it with other products in the market before availing the scheme.
The author is the Chief Sales Officer at Lodha Group