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Buying Advice for Young Couples..!
By
Mr. Ashwinder Raj Singh, CEO - Anarock Property Consultants
While
the cosmetics market and its customers wrestle with new age-defying and
age-reversing concepts and products, there is one market segment that has
actually discovered the fountain of youth.
Over
the three decades, the grey has been gradually leaching out of the Indian home
buyer's profile, leaving full heads of natural black hair and unwrinkled faces
in its wake.
Gone
are the days when only the elderly could or would buy homes on the back of
their life savings.
Thirty
years ago, the typical Indian home buyer was invariably aged above 50 and
cashed in his or her provident fund to finally make the dream of homeownership
come true.
Today,
home buyers in India are younger than ever, with the age group of 34-38
populating a majority of sales deeds.
Furthermore,
these young buyers are maximizing the advantages of youth with the power of
team leverage.
With
dual-income nuclear families having become the new norm, young married couples
are the preferred customer 'configuration' for banks and home loan companies.
Their
combined creditworthiness is boosted by the very healthy risk profile which
banks see in people who have two decades or more of active professional life
ahead of them.
The
result? The ability to buy a sizeable home in a good location today, locking in
its value and capital appreciation potential. The Great Indian Dream is alive
and kicking in its vibrant and highly aspirational youth.
Know
your fundamentals
That
said, youthful home buying enthusiasm should ideally be tempered with sound investment
advice. While the Internet has certainly opened up the domain of real estate
knowledge, it has unfortunately also added several levels of contamination from
innumerable marketing channels.
So much for finding the 'perfect location' for
your 'dream home' online - according to Google AdWords, literally everything is
perfect and ideal. You still need to be able to separate the wheat from the
chaff on the basis of your own knowledge of the market.
Likewise,
the decision to buy a home should not be influenced by other people's thoughts
and opinions. At the end of the day, this is a very personal decision which
does not lend itself too well to 'one-size-fits-all' investment philosophies.
While
one young couple with a certain degree of financial agility may see a lot of
sense in buying a home as soon as possible, another of comparable fiscal
ability could be content to live out their lives in rental homes and invest
their surplus money elsewhere.
There
is also no shortage of fence-sitting real estate agnostics who are perpetually
waiting for changing market dynamics, rather than their own innate desires, to
convince them of home purchase.
For
now, let us consider the first set - young married couples who have firmly
decided to buy a home.
The
‘Starter Home’
Definitely,
young aspiring homebuyers should keep in mind their current and future finances
and balance these with their current needs. The concept of 'starter homes' is a
very valid one in India - the kind of homes that a majority of young couples
prefer or able to buy in the initial stages of their careers and / or married
life.
Such
homes are generally only as big as they need to be but are in well-connected
locations which allow for easy transit to and from work.
The
idea of buying a starter home is to secure a property within one's existing
means, and then upgrade to a larger home as the family as well as financial
capability grows. Ensuring that the starter home, though compact, is in a good
project with good amenities, and in a well-connected location, will enable the
couple to sell it off more quickly and at a better price when the time to
upgrade to a larger flat finally comes.
This
is by no means the default choice for all young couples - many prefer to invest
in larger homes, which their combined credit-worthiness can certainly permit.
Here
in lies a primary fact of the market - a budget for home purchase is not always
only a function of financial ability, but often also of personal choice.
Deciding
the budget..!
When
it comes to deciding on how much to spend on buying a home, much depends on
whether the newly-baked family comprises of a single income earner or whether
it is a dual-income scenario. If it is a single-income household, a starter
home in a good project by a reputed developer is the way to go.
In
the case of a dual-income situation, a couple can set its sights a little
higher - but it is important not to overreach.
The
main focus at this point in one's family life should be to secure home while
simultaneously retaining the ability to enjoy the first years of married life
in reasonable style.
Travel
and entertainment will and should be on the cards. Later, they also need to
factor in the financial pressures of parenthood, and these eventualities should
be prepared for in advance. The objective for a newly-married couple - unless
they come from wealthy families - should not be to immediately buy the biggest,
flashiest home on the block.
Buy
verses Rent - the jury is always out
For
a considerable segment of young married couples in India today, the purchase of
a home is definitely still a priority because:
- It frees
the family of empty rental expenses which reap no returns and instead
secures a performing asset which will appreciate in value
- With the
predictable expense of monthly EMIs on a home loan factored in, one gets a clear view of
what other investment options and life flexibility is still available
- A
self-owned home in India has a singular power to provide not only
accommodation but also a sense of security and comfort
For
others, it makes more sense to stay in rental homes and invest into other
instruments like mutual funds or even more adventurous speculation on the stock
market.
While it is obviously a challenge to judge how many young couples in
India lean towards one philosophy or the other, what can be said is that home
purchase has become a far more attractive option in India than ever before
The
current market scenario
Over
the past couple of years, we have seen significant property price
rationalization in many cities.
As a result, many more properties have now
become affordable for a much larger cross-section of aspiring buyers.
Also,
thanks to more ready inventory, the legendary mental torture of 'waiting for
possession' is now an option, not a necessity.
We
will not see any further lowering of prices, especially now that RERA is
cleaning up the market of fly-by-night operators and causing supply to slow
down. However, as of now, residential property in India has become more
affordable than it has been in several years. Simultaneously, home loan
interest rates have declined to further boost the logic of home ownership in
the country.
As
the economy gathers further impetus and the real estate market recovers faster,
bringing with it inevitable price escalations, locking into the currently
prevailing low rates is the best possible investment choice for young couples
who have decided on home purchase.
Even the extended suburbs of our larger
cities will densify over the coming years, adding better social infrastructure
while simultaneously bringing forth a dearth of supply due to depleting land.
As our cities widen, today's extended suburbs will become more central
locations. Buying a property in such locations now will lock in their future
potential
Investment
rationale, emotional value – or both?
While
the Internet, as well as advisory columns in financial dailies, continue to
offer conflicting advice, one immutable fact of the property market remains -
property always appreciates in the long run. All over the world, real estate as
an asset class provides excellent risk-adjusted returns in the long term. This
is not to say that investment in other instruments does not reap comparable or
even better returns; what it largely boils down to is one's own outlook.
The
intrinsic value that a self-owned home holds for an end-user differs a lot from
that which it conveys to a pure investor.
The pride and security of home
ownership in a country like India is a rather unique phenomenon which cannot be
replicated by other asset classes. Real estate is a performing asset in the
truest sense since it can either generate rental income or provide freedom from
rental outgo even as it gains in value.
Finally,
we do know that RERA will significantly crimp the supply pipeline going
forward, and reduced supply has a direct implication on prices. Losing out on
the best opportunities today in the hope of further price corrections can imply
a significant loss to those who defer their decision too long. The best
strategy for young couples who are firmly decided on buying a home today is to
negotiate the best possible price and go in for purchase.
About the author..
Mr. Ashwinder Raj Singh, CEO - Anarock Property Consultants
Arun Chitnis
Media Relations
ANAROCK
Property Consultants Pvt. Ltd.
(Formerly
Jones Lang LaSalle Residential Pvt. Ltd.)
M : +91 9657129999
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