Everyone dreams of owning a home, a place which is your own and where you can be yourself. Are you wondering whether this is the right time to buy your home? There are mixed views regarding the real estate sector. While some reports indicate an increase in volumes and prices, some indicate a situation where the supply has far outstripped the demand. As per a leading business daily, nearly 40 percent of the affordable housing projects are left unsold.

Recap

FY09 proved to be a tough one for real estate sector with conditions not being conducive for both buyers and sellers. Lower demand due to slowdown in the economy and deferment of purchase plans by customers led to pricing pressures. Prices had declined in the range of 30 to 50% during FY09. This coupled with higher interest rates and lower disbursement of loans by banks due to rising delinquencies further increased the problems. As we all know, the real estate sector is sensitive to movements in interest rates. The demand is higher when the interest rates are lower as the EMIs will be lower and vice-versa.

Recent scenario

India’s GDP grew by an impressive 7.9% in the September quarter, the fastest in the last one-and-a-half years. The economic activities like construction (6.5% YoY), real estate and business services (each 7.7% YoY) also reported strong growth numbers during the 2QFY10. This gives an indication of some pick up happening in across sectors.

On the interest rate: With recession woes looking to end and strong growth witnessed across sectors, the chances of the RBI raising interest rates in the future are higher. In fact a whiff of something likely to happen on this front is already becoming apparent and perhaps will kick in around March-April 2010. Further, with higher liquidity and poor monsoons, inflation concerns are evident. So everything indicates that the interest rates could only go up from here.

What should one do?

While this may sound as an apt opportunity for buyers to capitalise on the prevailing low rates of interest by striking a deal, several considerations need to be made with regards to money. Being a long term investment, one must definitely check if he/she can afford the long term loan repayments. Also, consideration to a stable job, provision for contingencies and personal finances should be looked into before buying the dream house.