Should you go ahead with your home-buying plans soon after the Covid-19 lockdown?
The real estate experts suggest understanding the impact of the Covid-19 pandemic before your property buying expeditions.
Buying a home imposes financial burdens on investors since they have to cough up money for the down payment and pay EMIs every month for several years. And the Covid-19 epidemic only adds to property investors’ woes.
Now, if you were planning to purchase a home this year, the unexpected turn of events may have left you wondering how to go about your plans from now onwards.
However, you should first understand how the pandemic affects the real estate market.
Real Estate Sector against the Covid-19 pandemic backdrop
For some time now, the realty sector has been tackling a credit crisis, slackening economy, and rising inventories. And, with the recent Coronavirus epidemic, the scenario seems to become grimmer.
Owing to the nationwide lockdown, most construction activities were halted. And many laborers were seen returning home due to uncertain times ahead. As a result, the construction industry has to grapple further with labor shortage in the near future. This will lead to disruptions in the recovery course of the real estate sector.
To complicate things further, several developers have taken large-scale loans. And, if they cannot redeem their value, they will be dealing with a liquidity crisis soon enough.
Having said that, the government recently advised the state governments and union territories to prolong by six months the property registration process and deadlines of all certified projects which will expire on or before March 25th, 2020. Also, they must comply with the stipulated instructions without any separate applications for further easing the stress of property developers.
Additionally, the Reserve Bank of India announcement to slash repo rate by 40 basis points to 4% will offer some relief to the developers. However, no clarity of when the realty sector will recover is yet coming forth.
The pandemic crisis from the Home-buyers’ standpoint
Conversely, if you’re a current home-buyer who has taken possession of your property and your income sources have not been affected due to the Coronavirus pandemic, then you stand to gain. Because home loan interest rates will touch new lows owing to the RBI’s latest repo rate cute notification.
The groups who are servicing a repo rate-linked loan can expect their EMIs to subside soon. On the other hand, those people who are servicing MCLR-based loans may have to wait for some time until the lender resets such loan rates.
Plus, lenders have been instructed by the Central bank to extend the loan moratorium option to borrowers by an extra 3 months. In turn, the borrowers can manage their finances more efficiently amid these extraordinary times.
Even so, you must note that this EMI holiday is not a waiver but only a repayment deferment. Besides, interest rates will continue getting accrued during these 3 months. In the process, your EMI burdens will start mounting – particularly, if you’ve recently started repaying your home loan.
Your best bet is to go for this facility only if you’re having financial troubles. Also, if you plan on availing this option, make sure you have a sustainable plan to prepay the accrued interest during the moratorium after the expiry of the EMI holiday.
Moreover, the government’s initiative to extend the deadline of the Credit Linked Interest Subsidy Scheme (which comes under the Pradhan Mantri Awas Yojana) to March 31st, 2020, could realize the home-buying aspirations of middle-class families amidst the ongoing economic hardships.
As part of this scheme, families having annual household incomes in the range of 6 lakhs to 18 lakhs per annum are eligible to avail the benefits of an upfront interest subsidy up to Rs 2.35 lakh on the approved home loan for one more year.
Nonetheless, if you have not yet taken possession of your property, you have to wait for some time because of construction lags. And if you’re looking to purchase a home, you might be better off with a developed property as compared to one that is under construction. Further, you could get better offers because the latest developments can drive property rates to go down shortly – many experts and property managers say so.
However, if you’re equipped to take some risks (including delayed completion or other market-linked ones), then you can consider investing in under-construction projects. Only be on the safer side by checking the builder’s record, credentials, financial holdings, RERA property registration, and bank partnerships before finalizing your plans.
So, how should you move ahead?
Keep in mind that the Covid-19 crisis will lead to property registration delays and other clearances. More so, since people are losing income sources, they may not be able to pay EMIs.
Simultaneously, the post-Covid-19 era will witness a fall in property prices because of low loan interest rates. Thus, prospective homebuyers should consider all related aspects thoroughly and take practical decisions.
Finally, if you’ve purchased a property recently or intend doing so after easing of lockdown norms, you may not want to delay purchasing a home-loan insurance policy or term insurance policy – so, you’re well covered. Talk to your property management company, real estate advisor, or financial planner for they can help to draw viable strategies.
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