24 May 2022

What should homebuyers do while housing prices and raw material prices continue to rise

Given the increase in input costs, land prices, and the resultant impact of the pandemic on the cashflow cycle, a 10-15 per cent increase in property prices is expected in the next two quarters.

Input prices have witnessed a substantial increase (between 30-100 per cent) due to factors such as commodity price escalations due to the war in Europe, post-pandemic demand fluctuations, rise in fuel costs, and supply chain disruptions. Construction costs have also witnessed around 15-20 per cent price increase in bulk and finishing items. Due to the price increases and multiple work disruptions, the availability of continuous labour force has also become critical and therefore, led to an increase in labour prices as well. Given the increase in input costs, land prices, and the resultant impact of the pandemic on the cashflow cycle, a 10-15 per cent increase in property prices is expected in the next two quarters.

So, what can homebuyers do? It’s simple – secure a home now. Purchasing a home is the biggest decision that most people make in their lifetime. If you have found your ideal home, it’s critical to act now because home pricing is subject to multiple internal and external factors, including global trends and disruptions. All the external cues point towards an inflationary trend. Furthermore, the change in RBI policy leading to the increase in EMI rates means that it is advisable to secure your dream home today.

For millennials looking to enter the property market, it’s important to identify projects that can provide price appreciation, a resale option, and suit their transient lifestyle. Excellent connectivity, diverse amenities, and product specifications are some other key differentiating factors to look out for in today’s market. A great way for millennials to invest in the current property market is by investing in branded plots, which provide the necessary inflation hedge as well as the freedom to construct a house at a later stage. With thorough research, a plot from a reputed developer can also provide high appreciation returns, which are a good counter to the rising prices.

To further incentivize and subsidize homebuyers, the government needs to take action as well. Current affordable housing incentives need to be extended further in terms of affordable housing definition and eligible limits. Stamp duty reduction has proved to be an effective tool over the past few months and continuing this is essential to boost demand. Reduction in import duty and price rationalization for commodities whose rates have spiked by unusual amounts need to be relooked at, with a combination of multiple policy tools including import duty, price regulation, GST credit and waivers, taxation incentives, etc. and there are steps initiated to address the same. However, given the macro outlook, the disruption in the global supply chain and the multiple product options available in the market, the current market provides a good opportunity for buyers to conclude on transactions.

(Pushpak Pusegaonkar is the chief operating officer at Century Real Estate)


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