Think Beyond Festival Discounts For Property Planning

Developers have started offering discounts and freebies on residential properties as we get closer to the festival season. The most common is a waiver of goods and services tax (GST) of 12 per cent. On a property of Rs 5 million, it’s a straight saving of Rs 600,000. In some instances, the developers are even willing to bear the stamp duty and registration charges, which are another 5-7 per cent. Then there are flexible payment schemes and even freebies such as gold, modular kitchen and air conditioners.

The discounts and schemes are similar to those of last year, but they are steep, according to real estate experts. 

For investors, the stock market is still uncertain. There’s no clarity on whether the prices will hold steady or they will rise further. Experts suggest that investors should look at real estate once the elections are over and there’s more certainty in the economy.

Red light for green shoots: Investors should look at putting money in real estate once sales start recovering and there’s a clear upward trend. A few reports state that sales are better than those in last year, suggesting ‘green shoots’ of recovery in the sector. But property consultants say that the data is relative – it may look better than the same quarter last year but is nowhere close to what it was three years ago.

Also, the number of units sold could be high compared to last year but prices have not moved up. Before investors take a plunge in the residential market, they should ensure that there has been steady price rise for two quarters.

Your investment can go into the red: Property consultants feel that despite the number of transactions having gone up, prices may take at least two years to rise quarter on quarter. Suppose you invest Rs 10 million in a house, and the prices remain stagnant in the first year or move up just 2-3 per cent, your inflation-adjusted returns will be negative. You will be better off investing in a low-interest-yielding bank fixed deposit rather than investing in a house for that one year.

Prices have shown negative growth over the past three-four years. Investors who entered the market during this period would have seen a negative investment return. The discounts offered now may also remain in the near future until sales pick up and developers are able to hike prices. It means availing of the discounts may not lead to positive returns either.

Lower returns, longer horizon: Real estate is now a long-term investment avenue. “Investors with enough patience and a long-term horizon of five-six years can enter the market as long as they have chosen their developers, projects and locations astutely. Flexible can work: In the current environment where everything is against investment in residential property, a flexible payment scheme can work for the investor if he is buying the property without taking a loan. In these schemes, the buyer needs to pay 5-10 per cent of the cost upfront and the remaining on delivery.