THE BRIGHTER SIDE

The negative flutter in the stock markets caused some anxiety to home buyers. After hearing various viewpoints about the real estate market crashing if the Sensex plunges futher, one should point out that real estate is an asset class, which is not directly impacted when the bears take over.
It has been seen over the past few years or more that the increase in the profitability and the Sensex has had a definite impact in the liquidity and sentiment of an average home buyer.
Actually, the stock market has helped boost housing in two ways, it has helped drive the ownership rate to its highest level in history as the sales of the apartments over the past three years have gone up, and it has enabled many people to buy more expensive homes than they might have otherwise purchased.
Since 2004 the stock market has played a key role in that and there’s been a noticeable increase in more expenive houses since the market exploded too. But if the market continues unabated, this will continue to tighten the screws on interest rates.
This is an area of concern to economists and is an important reason why interest rates may soften a bit in coming times.
In any case, a first home buyer will remain a home buyer by default even if the stock markets or property markets are impavted aither way.
Mature investors or home buyers do not put all their “aggs in one basket” to lose them all. The present market is dominated by actual users, Non-Resident Indians who are looking to buy property as first homes.
It has been seen that most buyers place only 15 to 30 % of their own funds and the rest is taken by home loans paid over 15 – 20 years. So even if the markets are impacted negatively, they have their own home to live in and a good time frame of 10 to 20 years to pay out and with the overall picture of india Inc booming, it should not make any significant difference.
Investors who tread on both sides by earning from their stocks and using to pay their profits as EMIs for their property purchase are usually the most affected, as they are hedging completely on their profits from the stock markets but this again may be a temporary phase but can have a very sharp impact during heavy bear sessions.
With the way property prices have increased over the past few years and are probably still increasing while you are reading this, it is a good sign at least that builders may not increase prices looking at the overall sentiment being weak.
No, I’m not out of my mind leading a cheer for a stock market crash. If the stock markets remain low for some time, it will be better for the real estate market if a small correction or a slowdown happens. The figures of notional losses in the real estate side will be far more less than the tangent stock market figures. Also, it should be seen very clearly that our homes which we reside in should be kept away from the analysis and impact of up and down as if the property markets go up we don’t sell nor do we sell when they go down. If you own an already built out property, be it an office or an apartment, and if the same was meant for investment, in most cases it will be leased out giving you returns or in the market hunting for a tenant. If it is under constructuon you would have bought it at a far lower price than the value it is today. In any case, for a new entrant buying a new home in the top end sengment of the grown property market, there is a risk element but then a home is a home; one buys it to live in it and not to speculate, as in the stock market. Over the past few months, builders have increased prices in line with the Sensex and if you clearly notice, there has been a parallel growth; as the stock market grew real astate price continued an upstream steady move. During march, usually the stock markets get a bit volatile as they are dependent on the third quarter results and then the expectations from the Budget. Investors who have exposure in stock and looking to exit and enter into reality should be more careful keeping in mind their immediate or future need of funds for their immediate or future need of funds for their proposed EMIs or property buying plan. You need to protect your back and I guess having a roof on your head for many of u does that.