House Prices Are Increasing, Home Loan Rates Are Low: Is It A Good Time To Buy A House?

Anyone who is looking to buy a house is always worried about whether this is the right time to buy. If you are planning to buy a house to live in and not as an investment, then this may be the time to look at the two most important contributory factors seriously—residential real estate prices and home loan interest rates. 

Uptick In Real Estate 

A recent report by real estate services company Knight Frank reported that in India, the residential segment could see up to 5 per cent rise in values in 2022. The momentum from 2021 is expected to continue this year as prospective buyers look for bigger homes, better amenities and attractive pricing. 

According to this report, 77 per cent respondents in a survey had indicated that access to large green areas has become more important than before. Gated communities and apartment complexes with large open spaces will remain in demand this year. Data from Square Yards shows that there was strong sentiment regarding home ownership of larger homes with about 43 per cent of the total demand tilted towards 3BHK and larger configurations in 2021, according to Rahul Purohit, national sales head, Square Yards. Read more about it here.

Real estate experts believe that the pandemic has transformed homebuyer sentiment and is also supported by low house prices across markets. Vivek Rathi, director-research, Knight Frank India, says, “In case of the Indian residential segment, after a multiyear down cycle, the pandemic has transformed homebuyer sentiment and is also supported by low house price across markets, low home loan interest rate and best affordability level. Income growth, particularly led by IT and other new-age sectors, is also helping prospective homebuyers fulfill home ownership desires. Besides, positive wealth effect in recent years has helped consumers upgrade to bigger and better houses.”  

There is a broad expectation of prices rising in residential real estate among all stakeholders, including institutional investors. “The share of residential, within the overall real estate private equity investment domain, that gradually shrank from 79 per cent in 2011 to 11 per cent in 2019, has now increased to 19 per cent in 2021,” says Rathi. 

The early months of 2022 are already showing signs of growing demand.  

Taking Advantage Of Low Interest Rates 

According to myloancare.in, at present home loans for major lenders such as State Bank of India (SBI), HDFC and Bank of Baroda lie in the 6.50-6.70 per cent range.  

At present, overall policy rates are on the lower side but given the conditions of higher fuel prices and inflation, among other reasons, they may be increased soon. The repo rate at present is at 4 per cent. It has been at this level for more than 20 months and is the lowest since April 2001.
However, many experts have opined that the central bank will increase the policy rates anytime soon. And when that happens, lenders will increase their home loan rates as well. 

The window of opportunity for homebuyers to avail low-interest rates is unlikely to prevail for much longer--sooner or later, repo rates will rise, Anuj Puri, chairman of Anarock Group, had said recently. Read more about it here.

Higher Costs Loom Large 

Experts believe that while the real estate market was resilient in 2021, higher costs and inflation can be a challenge in 2022. "Though the sector picked up its momentum towards the end of Q2 2021 on the backdrop of lower borrowing costs, duty cuts and tax incentives, escalating costs of raw materials and upswing in construction costs forced real estate developers to operate at wafer-thin margins," says Rathi. 

Moreover, he noted that realtors are absorbing the losses themselves as of now since they are wary of the impact of property price hikes. "But it’s highly likely that property prices will increase in the coming months with the real estate sector has come out of the woods," he added.  

Keeping all these factors in mind, if you want to buy a house to live in or for immediate personal use, now may be a good time to take the decision to purchase. If your credit score is high, you may be able to get the lowest interest rates on home loans. However, do remember that buying a house involves other costs too, including registration, stamp duty, brokerage etc. So, do an indepth assessment before deciding.