Category: Property Blog (3)

1) I have been hearing that real estate prices will fall due to demonetization. Is that true? Will home prices come down?

NO & YES!

NO because the new property market which is driven by home loans usually has minimal cash component in its transactions. Chances of prices coming down in the new property market as a result of demonetization is very low.

Moreover, property prices have grown by just 3 – 4% (Y o Y) in most cities in the last 4 years – much lesser than the rate of inflation (6% +) & are closer to circle rates in most metros. Is there scope for further drop? Very unlikely.

YES because resale & land transactions have always had cash as a major component in their transactions and are likely to see a price correction. These segments will see some distress sale happening in short & medium term. Luxury properties are likely to see a higher price correction in the short term

Your cheat sheet to understand impact of demonetization on home buying

2) What is going to be the impact of demonetization on real estate?

Technically, demonetization is likely to have minimal impact on the new property market. Resale & land property markets are the ones that will be affected But because a lot of news articles do not distinguish these 3 segments while predicting impact, a negative sentiment has overtaken the market as a whole. Overall real estate transactions will be lower due to negative market sentiment for the next 3 – 6 months.

Negative sentiment – That’s where the opportunity lies.

2.a) Opportunity in the new property segment

New residential properties will see lower demand due to negative market sentiment & perceived uncertainty Builders will face a cash crunch due to sudden drop in sales To attract buyers & maintain sales volume, builders are expected to introduce attractive offers/freebies & other benefits like never before Builders are NOT likely to reduce prices because of reasons explained for question 3. But they will be willing to negotiate on prices with serious buyers across the table & offer considerable value for the same price (in form of modular kitchen, free car park etc.). If you are salaried/self employed and looking to buy your first home, next 6 months is a wonderful opportunity to save big.

Your bargaining power with the builder has just gone up a few notches.

2.b) Opportunity in resale property & land

Resale & Land segment will see a direct impact from demonetization since cash component plays a big role in these transactions. Unaccounted cash dominates in resale & this is what most articles refer to when they talk about demonetization impacting real estate Demonetization has sucked out most of the unaccounted cash from the system. Affluent buyers who could pay cash & buy are out of the market. Temporarily! This leaves just the end users with sufficient loan eligibility in the market. Lower demand would mean pressure on sellers to reduce prices Sellers with immediate need of money will go for a distress sale & be ready to sell off at a lower price.

If you get hold of such a deal in the next 6 months, you will reap the rewards in the long term

3) Will builders reduce the price of their properties?

Very unlikely. Why?

In last 4 years, property prices have grown at a lesser rate than inflation – which means properties are already being sold now at 2012 prices (priceadjusted for inflation) Most builders 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 be required to comply & cost of compliance will squeeze margins further An explicit price drop will also impact builders credibility with past & existing customers & most builders would not run that risk Instead, builders will be willing to negotiate on prices with serious buyers across the table & offer considerable freebies in form of modular kitchen, free car park etc. till the market sentiment turns positive

4) If land prices are expected to come down, won’t that bring down property prices?

Land acquisitions/transactions where cash plays a major role will witness higher impact But as we explained, not everyone might be willing to sell at lesser price. Only distress transactions will happen It will take at least 3 – 5 years for these to enter the market as fresh projects. So no short/medium term impact expected in the residential market. Anyway, given the liquidity crunch, no. of new project launches are likely to come down over the next 12 months

5) So, is now a good time to buy a property?

If you are looking to buy your first home, a big resounding YES! Why?

Reason 1: Builders would be in need of cash liquidity to fund construction & pay off wages. They would be willing to negotiate & offer the best possible price across the table to serious buyers.

Reason 2: Your options just got wider. Resale properties that were out of your budget reach earlier will now become affordable due to distress sale.

Reason 3: 90% first time home buyers fund their property purchase through home loans. 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.

Its now up to smart buyers to make use of the opportunity

6) What doesthe next 6 18 months hold for a property buyer?

Though the last 3 years has always been described as a buyers market, the power a buyer could wield has just gone up a few notches. This is expected to be the case for at least the next 6 months After this phase, with loans getting cheaper, new currency coming into the system & sentiment turning positive, demand is expected to go up. Since new launches are also likely to slow down, demand for ready to move in homes already in the market will intensify. With more buyers entering at this point, prices in the primary market are most likely to go up.

7) Can I wait till another 6 months & buy a property after that?

Of course you can. Buying a Property is a big decision & you should do it only when you think is the right time for you. Only downside being after 6 months, you will be competing with more buyers & you might have to buy the same property at a slightly higher price We would suggest you to however start your search process now so you will have enough time to understand the market scenario & assess your options Also, though you don’t plan to buy a property right away, getting in touch with sellers early in your search phase will indicate you are serious & might fetch you a great offer not available else where.

Feel free to avail professional help if necessary. It would be worth it.

4 things you could do to take advantage now

Get to know your affordability – Get a pre-approved home loan & arrange funds for the 20% that has to come from your pockets Start searching for properties with a trusted advisor & have a range of suitable options ready Start getting in touch with sellers, visit the projects physically & show them you are serious Brush up on your negotiation skills. You will save a few lakhs!

Realtors and agents across the country dread the FSBO (For Sale By Owner), and it’s not just because these sellers are playing dress-up and pretending to be real estate agents. There are all sorts of headaches and hiccups that can happen when not working with a professional, and here are the top five:

  1. Trust
    A FSBO is the owner of the home they want to sell, and they are not a licensed real estate agent. They aren’t bound by the Code of Ethics that Realtors are, and may do and say whatever they want to get their home sold. This is like buying sand from a guy on the beach, or taking nutrition advice from Little Debbie.
  2. Documentation
    It is required by law for disclosures to be made about the condition of the home, and if any repairs were made. A real estate agent will have access to the database of paperwork and have it properly documented, and know how to pull records to verify there aren’t outstanding liens, assessments, or back taxes owed. A FSBO may not even know this documentation is required, and possibly may try to cover things up.
  3. Negotiation
    Throughout a real estate transaction, there are so many back and forth negotiations going on you’d think it was a tennis match. This is because real estate agents are hired to best represent their clients, and there are so many complexities involved, including: the offer, closing date, financing terms, comps, appraisal report, inspection report, daily occupancy rate, and more—so it’s best to let the professionals handle it all. FSBOs, on the other hand, are representing themselves and don’t care what you need or want.
  4. Finances
    It’s easy to assume that a FSBO is broke; otherwise they would’ve hired a professional real estate agent. If the seller is broke, then what happens if the home doesn’t appraise? Or if the inspection report reveals the furnace and roof are on their last leg and need replacing? It’s also easy to assume that a FBSO is just cheap; otherwise they would’ve hired a professional. This may be worse, actually. Do you really want to buy a house from someone who might have also cut corners on their home instead of paying a professional to fix the plumbing, electrical, roof, etc.?
  5. Sense of urgency
    Anyone who wants to sell their home, and wants it to sell it quick, will hire a real estate agent to get the job done. Maybe the sellers are relocating, or need a larger home and want to move over the summer before the kids go back to school. Or, maybe they’re just really smart and trust a professional to do the job right! You won’t find as much urgency with a FSBO, because most times they have no clue where they’re moving or when. And according to a recent report you could even run into problems getting them to vacate after closing!

    In summary, why do some people think they are qualified real estate agents and list their homes FSBO? Statistics show that an overwhelming 85% of them do list with a real estate agent eventually, so that speaks volumes. As for the 15% that don’t? Well, most will probably die trying… in the same house that’ll be eventually sold by a real estate agent.

The Bottom Line
There are some wonderful homes on the market that are listed by owner. It’s not that you should necessarily turn a blind eye to them; rather, don’t go into the situation alone. If you don’t have an agent, hire one to represent your best interests.

Here Are 10 Reasons Why You Should Be Investing In Land:

1) With Vacant Land, You Don’t Need to “do” Anything to the Property.
Forget construction! Forget renovations! You don’t need to be an expert or know anything about how to rehab a property yourself. In most cases, you really only need to know one thing: “Is the property suitable for building?” As long as someone else can build on the land if/when they want to, a huge part of the battle is already won.

2) Land is a “Hands-Off” Investment.
Have you had enough of dealing with tenants, toilets, bugs, mold, lawn care, leaking roofs, bursting pipes, broken furnaces, and the hundreds of other issues that come with owning buildings? Vacant land doesn’t involve ANY of those things. Once you buy it… it sits there, it behaves itself, and nothing happens.
3) Statistically, Vacant Land Owners are Highly Motivated to Sell.
Why? Because vacant land owners (by default) are always absentee owners. When a person doesn’t live inside of (or even near) the property they’re trying to sell, there is less of an “emotional connection” (because it isn’t their primary residence). In many cases, you’ll find that these sellers are willing to sell their land for pennies on the dollar – simply because they don’t live anywhere near it, it’s not producing any income for them (because they don’t know how to optimize their land correctly) and as a result, they are much more apathetic about it. Find these people, and you will find some incredible deals.
4) Land Investors Have Virtually No Competition to Deal With.
Are you tired of dealing with such stiff competition on every property you try to buy? Are you sick of getting outbid on every good deal you’re lucky enough to find? Well guess what… there is virtually no competition with land. You see – most real estate investors have their minds stuck on: “houses”, “apartments”, “commercial property”, because that’s what everyone else does. Most investors don’t understand the superior benefits of land and this can definitely play to your advantage.
5) Land Investors Call Their Own Shots.
When you buy vacant land the right way, it’s easy to buy each property with your own cash and completely avoid dealing with banks and mortgage companies. When I got started as a land investor, I had $3,000 to my name and to this day, I have never had to borrow money from a bank. Ever. When you know, it requires very little start-up capital to get your business up and running.

6) When You Learn How to Research Properties Effectively, you can Buy and Sell Vacant Land Properties Without Ever Seeing Them In-Person.
In 2011, I bought and sold a parcel of land and grossed over $44,000. The entire process took me 5 months from start to finish and to this day, I’ve never actually seen this property with my own eyes. Everything was done virtually, using the tools that you and I have available for FREE online. The beauty of land is that it doesn’t involve any structures. This means the inspection process is VERY simple – and if you’re doing the right research, you can easily buy your properties without ever visiting them in-person.
7) Add Seller Financing to the Mix and EXPLODE Your Income Potential.
When you combine vacant land with the power of Seller Financing, it’s a match made in heaven. It can open up the doors to finding MANY more buyers, because most banks are very hesitant to lend money on vacant land. Due to the scarcity of “easy money” financing, a land investor can use this to their advantage by charging a higher-than-market interest rate and many people will gladly pay it. Seller Financing is also a great way to create multiple streams of passive income that act like rental properties, but come with virtually none of the typical headaches that rental properties are known for.
8) Land is Very Inexpensive to Own as a Long-Term Investment.
When you buy a piece of land for the right price, there are no mortgage payments to make, no utility bills to pay, the cost of property insurance is nominal (if you have it at all) and property taxes are extremely cheap. If you want to park your cash somewhere and forget about it, vacant land could be exactly the investment vehicle you’re looking for.
9) Land Gives it’s Owner Peace of Mind.
Think about it – land is a long-term, tangible asset that doesn’t wear out, doesn’t depreciate, and nothing can get broken, stolen or destroyed. Put all of these benefits together with your ability to buy it for next-to-nothing… and can you think of a better combination?
10) They Aren’t Making Any More Of It.
Most people don’t think of vacant land this way, but the reality is – land is an extremely valuable resource with limited quantities available. Especially when you purchase land in the path of growth, you will find yourself with a finite asset that a lot of other people want to get their hands on. Stocks, bonds, mutual funds and 401Ks all make sense in certain scenarios, and so does land. If you go into this with the intent of holding the right property for the long-term, it can make a lot more sense (and be a lot more profitable) than any other retirement vehicle out there.