By Dr Sanjay Chaturvedi
Banks are now offering loans to value as 60% on agreement value. Prices have gone out of proportionate with income level. Supply is restricted and majority is constructed by private players.
These are the facts which restrict a home seeker person to find his dream home. In Mumbai, a minimum 2BHK is selling for a crore of rupees. And to purchase it, you must be able to pay an EMI of one lakh a month. Housing Finance Companies are making the loan process difficult day by day. Previously, it was 110% of agreement value and without O.C., and the housing finance was available. But now, the O.C. is a must to get a home loan. By increasing the margin upto 40% for such expensive assets, it is now practically impossible for a common man to purchase property in Mumbai.
Those purchasing are mainly financed by family partition or compensation received from redevelopment of society or government projects. A common man is simply left with nothing but to ask rates every day with the hope that property market will drop to his affordable limits.
Politicians, margin investors and speculators and mediators are inflating property rates by 1000%. Now mutual funds and other fund managers are speculating for a margin of above 30 % IRR in a year.
Taxation like property tax for recurring expenses after acquisition is also one of the most vital aspects in deciding to purchase property. There are no buyers and takers for such costly properties. From Goregaon to Borivali, the rates have reached to Rs.10,000/- level again. Those who have purchased are funded by redevelopment money offered by builders. But by and large the sustainability of such rates is not likely in near future. The same situation is with the Central Suburbs. Chembur and Ghatkopar are the only localities where the sale is happening but at a discounted rates.
The rates will fall in near future since the festive sensitivity is over and affordability rule will prevail in the market. Housing Finance is hard to come by for under construction projects and the economic scenario is very dull even after a strong government. Real estate will take time to become real.