Effect Of Rising Rent: Despite Increasing Interest Rates, Sales Of Houses Increased By 60% In 2022
Do you rent your home or have you purchased one? Almost everyone who is employed must answer this question. The topic is still relevant whether you reside in a Tier-2 or Tier-3 city or a metropolis. There will undoubtedly be arguments in favor of or against your response, whichever one you choose. Someone will explain why paying rent is a waste of money. Someone would counter that if you purchase a home, your earnings will be used for your monthly installments (EMI). Purchase a home outright, make EMI payments, or live on rent.
Every young person who has entered the workforce has undoubtedly thought of this query. According to the state of the market, the average rent rose by 12% in the first half of 2022 (January to June). While the sale of homes has surged by 60% compared to the first half of 2021, despite the rise in interest rates in May and June. Despite the growing cost of building, there is a greater demand for dwellings. Additionally, according to a survey by the worldwide real estate consulting firm Knight Frank, the expansion of the Indian real estate market would not change even if interest rates reach 2019 levels.
According to market analysts, this is the ideal moment to purchase a property. The real estate market's trajectory also points to continued market growth. Come, let us explain why you should immediately realize your goal of owning a property. First, recognize the validity of the justifications for not purchasing a home. Although interest rates are rising, the mood remains unchanged Recently, the Reserve Bank raised rates by 90 basis points. Banks have raised the interest rates on mortgages as a result. Currently, a number of institutions are providing house loans with initial interest rates ranging from 6.4 percent to 11 percent. Many contend that although interest rates were at their lowest in 2021, they are already rising and will do so in the future.
Taking out a large loan to buy a property in this circumstance is wrong. The most recent increase in interest rates, according to data by Knight Frank, increased EMI on house loans by an average of 6.97 percent. In theory, as a result, affordable housing homes decline by an average of 2%. However, in reality, the majority of EMIs do not rise owing to an increase in interest rates; rather, the length of the loan's tenure (the time it takes to be repaid) lengthens as a result of the loan restructuring. This has no impact on the outlay that is made right away. Compared to 2019 levels, the present RBI rates are 150 basis points lower. According to Knight Frank, EMIs will rise by an average of 11.73 percent and affordability will decrease by 3.38 percent if the RBI boosts rates to that level. That is, the current position is far better than the pre-covid level.
According to Knight Frank's analysis, the real estate market won't be harmed until interest rates hit levels seen in 2019. In any case, because interest rates are variable, choosing to purchase a home should not be based on whether they are rising or falling. The interest rate for house loans taken out in 2021 has now gone up. Renting a home is more cost-effective... not today, rents will rise by 12% in 2022. Renters say that it is more cost-effective to pay rent rather than a sizable portion of their income as EMI. In a Tier-2 city, a 2 BHK typically rents for between $8,000 and $10,000 a month. The EMI on the home loan for this house, however, will be roughly $20,000, or 80% of the purchase price. Currently, the difference between rent and EMI is steadily shrinking. The average housing rent in eight major American cities rose by 22% during this time period compared to the same time in 2021, according to NoBroker's 2022 January-June study.
According to a NoBroker survey conducted during the lockout in 2020, 64% of tenants desired to buy their own homes. Renters are unable to alter the property as they choose. People had to make several arrangements for working from home, taking online classes, etc. throughout the outbreak. During Corona, earnings fell, but 40 lakh new employees are hired each month. It is a reality that many individuals lost their employment when Corona was under lockdown. Many people's incomes dropped. As a result, there is now less money available for home purchases, and many choose to keep their money rather than spend it.
It is true that many individuals in Corona now make less money. However, according to Honey Katyal, the head of the real estate consulting firm Investor Clinic, the nation adds 40 lakh, new workers, each month. The kids are the ones who participate in future planning. The Apna House is crucial to this strategy. This is the cause of the rise in housing demand. Housing market stagnation and poor investment prospects are as only 10% of individuals purchase homes as investments. The fact that real estate prices have been unchanged for the previous two years is one of the grounds used against buying a property. The likelihood of a higher return on the house's investment is still low in such a circumstance.
Only 10% of homebuyers, according to real estate consultant Anarock, purchase real estate as an investment. 90% of the population are end users, or those who must purchase and occupy housing. Investment, then, is not a top priority. The cost of real estate per square foot has climbed from 3 to 9 percent over the past year in the eight largest cities in the nation: Mumbai, Delhi-NCR, Bengaluru, Pune, Chennai, Hyderabad, Kolkata, and Ahmedabad. Check the market mood now. The number of homes sold in the first half of 2022 was 60% more than in 2021. The number of new homes being built grew by 56% The launch of new homes has also climbed by 56% in the first half of 2022, while home sales have increased by 60%.
While Mumbai has had the greatest number of sales and launches in terms of units, NCR has witnessed the greatest increase in sales. According to Santosh Kumar, Vice Chairman of Anarock, there is a growing demand for homes, and as a result, new housing projects are also being introduced. the greatest increase in demand for homes costing more than $1 million. Compared to 2021, a greater percentage of homes costing more than one crore were sold. That is, the pandemic has not had a significant impact on the high-income group's income.
The sale of homes priced under Rs. 50 lakhs have also somewhat decreased at the same period. In other words, those who want to purchase a home have cut their spending, but their desire to do so has not altered. 3) Young people employed in the service industry are leading home buyers The majority of house purchasers come from the service industry. The workforce in this area is young. The primary driver of the rise in housing demand is these young people. The purchase of a property is also being expressed by other professions. Additionally, the business class makes up about 18% of the population.
You get what you pay for when it comes to pre-built homes. You have all the information you need to decide whether or not to invest in the property in front of you. In contrast to a house that is still under construction, the buyer of a home is free to choose the best features for them, including the building's quality and the amenities offered. Real estate values are significantly influenced by location and community. Basic amenities and services must be accessible from your house, and although this is not possible with under-construction properties, it is possible to do so with ready-to-move-in homes since one is free to explore the area and determine their needs. Customers like a plan that makes effective use of the available space and is reasonable.
Important components include a deck, high-end bathrooms with anti-slip tiles, high-quality completed flooring, enough space for air and sunlight, and a magnificent balcony where you may enjoy your morning tea in a serene and attractive setting. The setting has always been significant. It should come as no surprise that a home's neighborhood is its most crucial component for purchasers. They are only able to change that. Buyers have the option of remodeling the kitchen or installing brand-new flooring. What about the house's location, though? This will always be considered the most important feature by customers. To bring you your first house that is ready to move into, Agrawal Construction Co. has all these criteria well centered in its company methods.