In the past few years, the price of houses has increased. Moreover, housing loan interest rates have also increased. Just like this, there are many other factors are at play in the housing market. Recently, the State Bank of India has increased its minimum home loan interest rates from 6.70% to 6.95%. Let’s read other details if you are willing to buy a house in India.
How did Housing Prices move In Recent Years?
Housing has been a red-hot market in the past few years. The RBI’s House Price Index (HPI) states that the housing industry growth has slowed from 22-23% in FY11 and FY12 to 3.4% in FY19, and 2.8% in FY20. Residential construction and home sales have dropped sharply, as the economy has declined because of the coronavirus pandemic. House prices have been continuously falling in major cities of India except for Hyderabad and Ahmedabad.
Change in Housing Taxes and Other Charges
Willing to buy a house in India? Here is everything you should know about the Goods and Services Tax regime and how it can affect you financially.
Goods and Services Tax or GST is one of the taxes that home buyers need to pay on the property. After July 2017, several changes have been made to this tax regime. Here are a few key details you should know:
Maharashtra has cut down the stamp duties in Fiscal Year 2021 after 31st March 2021 to stimulate the housing market. However, no changes have made to its circle rates/ready reckoner rates for FY22. It can be seen as an indirect attempt to kindle the market and acknowledgement the stagnant housing market. Transactions that are below the circle rate entice both income tax as well as stamp duty as per the circle rate. Keeping circle rates low results as a positive force on transaction volumes.
Is Housing a Better Investment?
Let’s say that housing rental yields 2% and the house price growth is 6% every year. Moreover, the costs related to it are property tax, maintenance tax, which is the amount to 0.5% of the price per year. Now, the total net return is equal to 7.5%. If it exceeds the equity markets then housing can be said a choice of investment. On the other hand, housing also includes certain risks like title disputes and tenant eviction issues.
Can Look For Alternatives
If you are looking for an alternative rather than investing in housing, then you may invest in real estate. You can choose Real Estate Investment Trusts (REITs) to do so. They invest in commercial property rather than residential. Also, they are needed to distribute 90% of their cash flows to investors. Company’s stocks linked to the housing market give you indirect exposure to housing.