Here's why the first quarter of 2017 is the best time to invest in real estate

There has been a spate of discussions over how demonetisation is likely to impact the real estate sector in 2017. Some say prices could tumble as much as 30%, while alternative opinion from the builder community has opined prices will remain steady and demand will go up.

The Hiranandanis engaged in the real estate sector, however, feel it will be an extremely favorable year for home buyers on back of strong reforms implemented in 2016.

According to Surendra Hiranandani, Chairman and Managing Director of House of Hiranandani, buyers should exploit the first quarter of 2017 to cash in on some excellent deals in the real estate sector.

He explains why – “To begin with, borrowing rates are expected to taper off in 2017 given the huge influx of money in the banks post demonetisation. This can set off a cycle, wherein lower rates of interest will direct borrowers to avail more loans at attractive interest rates. In future, owing to low returns it will not be feasible to park one's savings in bonds or fixed deposits, so consumers will prefer to buy property in the future.”

Notably, a simple back of the hand calculation shows that a 1% reduction in home loan rates will lead to almost 7.5% savings in EMI, thereby putting more money in the hands of the consumers.

The official economy will see a positive growth in the following months, elevating the purchasing power of the consumer, encouraging the consumers to invest more. But there is a reason why Surendra is stressing on buyers acting swiftly - “Home buyers can get excellent deals in the market as the industry has just begun to adjust to the new rules. This holds true especially for the first quarter of the year as most developers will look to sell existing inventory, so consumers must make the most of this opportunity and purchase property at attractive prices. New launches, however, will get impacted early on so the demand for available inventory and ready to move in homes will increase."

He adds - "The rise in demand will ensure that prices remain firm and start the ascent once again. So, it will only benefit those buyers who act swiftly and purchase the property in the interim period."

Developers will stand to gain too

While the first three months may test the waters for the real estate sector, as the year progresses the tide will turn in favor of the developers as well. There will be a spurt in demand as buyers will return to the market owing to attractive rates and good deals.

Surendra says - "The coming year will also see the demand shift from secondary market to primary construction owing to erosion of cash-linked sales. This will lead to better inventory utilization and ensure launch of new projects in the second half of the year. We can also expect significant foreign investments in the sector and increased participation from financial institutions, owing to better transparency and credibility post the policy changes initiated last year."

Also, Demonetization will not affect the established players as transactions take place only through the legal route. The commercial real estate sector will also not be hurt as they cater to office/industrial leasing where all transactions are done through banking channels.

The demographics of our country, Surendra says, ensure that the real estate sector needs to grow to meet the demands of an ever growing economy. India is currently growing at 6% per annum, but could reach double digits by 2019 if deregulation is in place.

He concludes - "The future of India and the future of real estate are intertwined with each other..."