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HOME-BUYING IS GOING TO GET DEARER. PRICE RISE INEVITABLE IN REAL ESTATE

19th Mar 2021

This was on the cards for quite sometime now. I wrote to you a few months ago signalling this very fact, giving you six reasons why price rise is inevitable. With various factors at play, home-buying is going to cost more for now. Here are four reasons why. If you're a home buyer, an investor, or are keen to know why, read on.


#1 INVENTORY OF HOMES WITHIN

THE CITY IS LOW

Since the year began, till around last week, there have been about 150 odd projects registered with the TNRERA. This number is much lesser than what it was last year. Moreover a majority of the development is around the Kancheepuram and Tiruvallur districts. Chennai city limits has seen only a handful of new projects being launched this year - many of them in the 2 Crore and upwards sector. Thus, with a lesser number of homes at hand and demand on the rise, prices are bound to increase in the coming days.

#2 THE LOWEST-EVER INTEREST RATES

Banks are jostling shoulder to shoulder offering home loans at rates never seen before. While Kotak Bank interest rates now start as low as 6.65%, Axis Bank is at 6.66%. SBI's rates are at 6.7%. This late surge is also mainly due to the various schemes offered by the state government that last till March 31st. Here's another fact - in fiscal year 2021 so far, SBI has disbursed 1 Lakh Crore Rupees of home loans. Public sentiment towards home-buying is also seeing a positive uptrend. Which brings me to my next point.

#3 HOME-BUYING IS MOST PRIZED POSSESSION NOW

I wrote to you last week about how the women of the family are spearheading home buying. More than men, they have seen the necessity (and benefit) of living under their own roof. With most working professionals back to their families / parents / native places with work-from-home being the norm, families are bonding after years of living in silos. The collective advantages of familial existence has pushed up a very positive sentiment about home-buying, thus causing a demand for apartments.

#4 INFRASTRUCTURE MATERIALS ARE EXPENSIVE NOW

The cost of metals from copper to aluminium to tin have shot up by 7 to 32% since January 2021. Crude oil is up by about 33%. Steel prices rose by around 30%. Cement prices are 50 rupees more per bag. All these materials have a direct impact on construction. While real estate developers have always accommodated for commodity inflation year-on-year, there is only that much that we can do to protect the end-user from such fluctuations. The industry has already done everything possible to keep prices in check. One way the Government can help is in reducing the Goods & Services Tax (GST) which is currently on par with luxury items. My logic is simple - if housing has to be affordable, the raw materials cannot be taxed as a luxury good.

SUMMARY

Home-buying has, is and will always be a wise investment. The real estate industry is an important hub in the wheel of commerce. Factoring in the residential, commercial and industrial domains, real estate literally drives the economy - creating jobs, livelihoods, inflow for banks in terms of interest on loans; Governments benefit with the various taxes and charges levied, investors enjoy steady return on investments... when the going is good, it is win-win for all involved.

We developers are leaving no stone unturned in making home-buying as lucrative as possible for you, the end-user. We are embracing new technology both in construction and security systems, following green norms creating sustainable properties, and making best use of the land within your property to ensure we create future-proof homes that will stand the test of time for generations to come. A home after all is the investment of a lifetime.

However, like I said earlier, this price hike is inevitable in the short term. We will tide over this. Great days lay ahead for everyone.

I hope I made your time worthwhile, reading my thoughts on this topic.

Take care and stay safe.

 

T Chitty Babu, Chairman & CEO, Akshaya Pvt Ltd



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