Planning to buy a house in India…. Wait.
I have been quizzed at many a forums about fallout of US sub prime crisis in India. Though I have tried to respond to this issue at various forums but I still feel that I must put it up on my blog for everyone to see.
US sub prime crisis is of its own system’s making. Over the years US has resorted to reckless lending primarily in residential segments. The loans were pooled together with debts and were named as CDO i.e. Collaterized Debt Obligations. These CDO’s were sold to global investors who were looking for higher returns. But as the liquidity on these CDOs vanished and there was panic all around. Consequent to this, US Fed stepped in and provided many feel good conditions.
Indian bourses have fallen over by almost 35-40% from their levels at the beginning of this year. Projected growth figures have also fallen over below eight percent. Manufacturing sector has not shown the type of growth it had during last two years. Interest rates have risen significantly. Home loans have become dearer. Now, what next. Those who were planning to buy properties have put off their plans for the time being as home loans have become dearer. The launchings of real estate projects have either been postponed or because of liquidity problem work has slowed down. The rates in residential properties have fallen in Tier-I and Tier-II cities by 5-10%. In some places fall has been more than 10%. But the situation can not described as sub prime crisis in India. Effect of sub crime crisis, if at all it is there, will be negligible.
With such a scenario, would it be proper to buy a new house at this juncture? My answer would be NO. Market has neither bottomed out nor has it stabilized. The coming festive season will see marginal increase in prices. Further many promoters who have been holding back a large chunk of dwelling units in NCR, Mumbai, Pune, Bangalore, Hyderabad etc will be under pressure to release these units, in coming days. It is expected that major correction will then take place i.e. just after the festive period. Probably post festive season would be the ideal time for you to think about buying a residential property.
Today it appears like that however based on revival of equity market and lowering of inflation, things can change a bit.
May also like to read: Planning to Buy Tablet, Wait….
