Buying a house or apartment in India today – what should you worry about ?

Home loan rates in India have started dropping, real estate prices have been soft for 9 or so months – you must be wondering whether this is the right time to buy that house or apartment/flat in India. Here are some thoughts for you to keep in mind:

1. It is recognized that there is a shortage of dwelling units in India. Sustained lowering in interest rates can reignite demand and therefore raise prices again

2. Price softening has happened primarily in outer areas of metros, while prices within the main cities like Delhi, Mumbai, Bangalore and Chennai have remained strong. In fact, prices in well known residential areas in these cities are now way higher than what most residents in the city can afford. This has been primarily due to shortage of land in such localities while demand has kept rising with growing wealth disparity in India

3. Outer areas of metros suffer from lack of infrastructure and security making it less attractive for people to live in these locations. Therefore, a significant portion of money that has gone into such locations has been investor money. Such locations are easily hurt by lowering of demand due to interest rate hikes

4. Land titles remain a major issue in India, except in areas approved by local authorities. With large amount of private equity money seeking large land deals, price of large tracts of ‘clean titled’ land and apartments/flats built on them keeps going up. However, unless demand for such properties/complexes in outer areas firm up, one can expect a flattening of prices here

5. Significant number of apartments/flats in such large complexes has been bought by NRIs and investors from outside the city, based on promising brochures. Unless you are able to assess the land and builder quality yourself, you are always at risk of being led astray by these promises.

As ever, the best way to buy property in India is to focus on areas approved by the local authorities and within accessible distance to key city centres. It will be a long time before India has road and metro infrastructure to enable people to live comfortably in more distant suburbs.