You can learn many things from your past. As the year 2019 is now over, you can now look back and pick up the things that can help make 2020 a better year. The previous year witnessed several major announcements that affected the real estate sector and the home buying process. Some of the key announcements and events related to the realty sector in 2019 are:
- Surplus tax deduction of Rs 1.50 lakhs on interest paid on home loans, for the affordable housing segment, announced in the union budget 2019-20.
- Permission for the reinvestment of an individual’s capital gains of up to Rs 2 crores, in two homes.
- Increase in the standard deduction for salaried people, from Rs 40,000 to Rs 50,000.
- Launch of India’s first REIT.
- Reduction in the GST rate for residential realty.
- Creation of a real estate stress fund, to ease the liquidity crisis in the sector.
Five lessons for buying a home in 2020
1. Choosing the right developer and project
Choosing the right developer and project will be crucial for home buyers in 2020, maintains Rohan Sharma, research head, Cushman and Wakefield. “The developer’s track record and financial credibility, remain extremely important considerations, especially when one is looking at a newly-launched project. Make sure the project is RERA-approved and listed on the relevant RERA website. Even for an under-construction project, the financial strength of the developer is important. So, choosing the right brand is important. The project’s completion stage and likely market response, should also be considered. One should be cognisant of their housing needs and not just attractive pricing offers,” suggests Sharma. The right developer and a project that is close to completion may be slightly expensive but will prove to be a better choice, for the home buyer in 2020.
2. Timing the market
The market continues to remain attractive, in terms of pricing. While ready-to-move-in properties and those that are close to completion remain preferred options, this inventory is also slightly expensive and constitutes a relatively smaller proportion of the overall residential market. So, one has to move quickly, in this segment. Attractive prices, discounts and payment plans for new launches, continue to be the norm and while they should not be the sole criteria for choosing a project, the home buyer has never had it so good, in terms of pricing.
3. Budget versus size
Conduct proper due diligence of your finances and budget, while also keeping in mind the most appropriate apartment size and configuration that serves your purpose. Make the optimum choice. If budget is a constraint, look for starter homes for smaller family sizes, which allow you to buy now and upgrade later. Do look at affordable homes on offer. Some of them by private developers are targeting the middle-income class and offer decent amenities in the given price bracket.
4. Choose the location smartly
Property seekers should note that projects differ, in terms of offers, due to the location, ticket size, and specialisation of the property, points out Deepak Goradia, vice-chairman and managing director, Dosti Realty. “Properties located in areas witnessing steady growth or in emerging areas, will have more attractive offers for buyers, as compared to properties in developed areas. At times, even banks and other financial institutions may provide benefits, in the form of lower rate of interest for home loans and flexible payment schemes, to ease the buyer’s purchase experience,” adds Goradia.
5. The right mix of loan and savings
Home loans are at their cheapest in a decade and hence, one can maximise on the loan eligibility, rather than depleting your savings. While most banks lend up to 6-7 times your income, this does not mean that you should over-stretch your finances. Servicing the debt after spending on household expenses, should not become difficult for you and should leave room for savings. Here again, choosing the right product, in terms of ticket size, becomes paramount. In 2019, banks have linked their home loan interest to the repo rate. So, you may benefit immediately, when the interest rate is falling. However, if the interest rate moves upward, then, you need to be ready to pay higher EMIs. In 2020, keep track of the interest rate movements.
Apart from the points mentioned above, one should also manage taxes smartly, to get the maximum benefit of the deductions allowed for home loans. If you have bought a home on loan in 2019 or are planning to buy it before March 31, 2020, then, you can avail of the extra tax deduction benefit of Rs 1.5 lakhs under section 80EEA.