Indian real estate: is this the right time to invest?

Published: December 15, 2008

Is this a good time to buy property in India? A lot of people would be interested in knowing the answer after watching realty prices in India grow like there is no tomorrow for last 2-3 years. Some of them must have missed the bus, and would love to buy low now and be part of another boom period. But will it happen any time soon?

Here are some of the important factors that might help you making the decision -

  • Real estate cycles are long - Unlike some of the quickly adjusting markets, property markets take longer period. The simple reason is that real estate inventory cannot be adjusted so easily…a building takes some time to build, and it’s generally not worth it to leave a half built building as is. So, if you have a horizon of 5 years, you might very well be required to stretch it to 7 years depending upon several market conditions at the time.
  • Transactions dry up when cycle goes low - Unlike perishable commodities, a seller can choose not to sell a property for a couple of years for a better price. So, price is not the only factor that’s affected. The willingness of people to sell also gets affected. So, finding a good resale property at a good price where seller and buyer both are happy remains hard.
  • Micro factors remain crucial - As Rama Bijapurkar has said, India has always been a heterogeneous country. We can’t generally paint all cities / states in India with same brush. For example, Chennai, Goa and Delhi NCR are significantly different from each other in terms of price levels, cyclic corrections, speculative activity, amount of foreign money involved, legal nuances and so on. The markets that have higher percentage of speculative activity, like Delhi NCR, rise fast and correct heavily, so potential loss as well as gain is higher.
  • Investment or self-stay? - If one needs a home for staying, he needs to focus more on affordability, property location, amenities and personal financial situation more than the potential price gain as the gain is likely to remain unrealized. Home loan interest rates is going to be an important consideration though. Inflation numbers are expected to cool down, so expect some easing out of home loan interest rates in coming few months.
  • What kind of property? - Land differs vastly from an apartment. It doesn’t offer cash flow (rent), but can prove to be multi-bagger. In Indian environment, land investment might be considered riskier than usual properties. Land can test your patience and you might need to wait for as long as 10 years for meaningful returns. A residential property is entitled for home loan and perks like income tax rebate on principal and interest of that loan, whereas a land doesn’t offer this value proposition.
  • Price negotiation - As of now, the advertised price can definitely be negotiated more than it could have been 6 months ago. Developers need liquidity right now, and they are more willing to listen and let go some of their margins. Just try to visit a good scheme and see how much they are willing to negotiate rather than relying on advertised prices.
  • Exchange rate - Dollar and rupee are playing yo-yo since last year. After touching highs of 38, rupee is right now at around 47. This is a crucial factor for NRIs and on site IT professionals looking to invest in home country, and right now can be a good time to convert that greenback!

Posted under categories: Buying Property, Indian Real Estate, Indian economy
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About Zamanzar

Zamanzar Advisory Pvt. Ltd. is a real estate advisory firm located in New Delhi, India. We offer online property search tools and offline services to help complete the transaction. Our services cater to real estate buyers, renters, and sellers. Visit Zamanzar to find out more!

7 Comments so far

  1. Mithun January 12, 2009 9:08 pm

    Nice Article Sumedh!!

  2. suaman February 25, 2009 12:00 pm

    hi sumedh,
    nice article even in such a scenario real estate developers have not lost their hope and still constructing new project.. as i daily see people coming in my office for approval… im also writing on real estate do visit my blog
    thanks suman

  3. Prasath April 18, 2009 11:23 am

    Thanks, Its good article sumedh, Keep posting such a article.

  4. Ram May 8, 2009 2:30 pm

    The IT industry does not go up in recruiting 1000s of new employees year after
    year or multipling salaries.Its only the IT
    people who invested blindly now they are all
    awake and not blindly investing .More over
    their was no hike in most of the companies,and very often hearing news of layoff has made people to pay taxes instead of investments.So for the next 3 to 4 years
    real estate will really sleep

  5. Krishna June 18, 2009 5:35 pm

    Yes I feel it is the right time to invest. The economic downturn has resulted in a sharp drop in property prices as developers had to attract customers for sales in their projects. The customers who were previously not able to afford should grab the opportunity and invest before the prices go up again when the economies improve.

    Meridian real estate

  6. Real Estate Investment Ahmedabad August 20, 2011 3:03 pm

    I personally believe that Prices will increase slightly but will stabilise and investing in property, especially from now to December, is favorable. The real estate sector is a tortoise but a stable tortoise.

  7. Deep October 11, 2011 12:05 pm

    I am living in Vadodara, Gujarat. I want to buy home/flat. Is it right time to invest or cost would go bit down? Please email me with your suggession. I am not doing business in property bye ans sale, I want to buy for residence purpose.

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