I have been
hearing that Pune real estate prices will fall due to demonetization. Is that
true? Will home prices come down? No, because:
I.
the Pune property market primarily is driven by home loans
and has no cash component in its transactions. There is no chance of prices
coming down in the Pune property market as a result of demonetization.
Moreover, property prices have grown by just 4.3% (Y o Y) in Pune in the last 4
years – much lesser than the rate of inflation (6% +) & are closer to
circle rates. Is there scope for further drop? No.
II. The home loan interest rates likely to reduce further. With
inflation coming down and demonetization increasing the money supply to banks,
the interest rates are likely to reduce. This will have a positive impact on
the demand for homes. With lower supplies and higher demand, the prices are
bound to go up.
III.
Developers in Pune have acquired lands at higher costs,
input costs of construction have gone up in the last few years. With RERA
around the corner, builders will comply & cost of compliance will squeeze
margins further. Also, the supply will fall after RERA’s introduction, leading
to rise in prices.
IV.
Over the years, the ready reckoner value of properties in
Pune has been regularly revised and now the government valuations of properties
are very close or in cases even more than the market price e.g. in Moshi &
Chikli. So, even if demonetization reduces the demand for real estate,
transactions below ready reckoner value does not get registered by the
authorities. This, again, will ensure that prices remain high in Pune.
V.
It is more likely that cost of under construction
residential unit will increase post GST implementation. Giving further rise to
the prices.
VI.
Today, with significant efforts taken by the Govt.,
institutional funds dominate funding real estate sector in the form of lending
developers as well as housing finance for home purchasers. It creates more
transparency and no latent returns, impacting no price drops as returns to the
lenders are fix and transparent.
So, is now a
good time to buy a property in Pune?
A big
resounding YES! Why? Especially if you are going to opt for a home loan. With
home loan rates expected to come down very soon, EMIs will go down considerably
making homes cheaper or can get you a bigger home @ same price. It’s now up to
smart buyers to make use of the opportunity. The media channels claiming price drop majorly
in secondary market, can not hold the prices in Pune’s primary market to go up.
