“In the midst of chaos, there is also opportunity” – Sun-Tzu
A lot has happened in Chennai over the past two months. From demonetization to the passing of the former Chief Minister to Cyclone Vardah to the Jallikattu protests, Chennai has been hit hard. Confusion and fear are common emotions a new home buyer grapples with these days.
“What will happen to real estate industry now?”
“Is buying a home in Chennai worth it?”
“Should I invest in real estate or some other asset?”
No one can predict the future, but what we can do is learn from the past and/or use information available to us and draw our own conclusions. By conducting an analysis, it is clear that right now (1-3 months) is the best time to buy property in Chennai. This is not a far fetched statement but a practical conclusion from information available to us.
Let us take a look at the main reasons why now is absolutely the right time to buy property in Chennai and why the window of opportunity will remain open for the next three months.
Post-disaster recovery is historically strong:
Cyclone Vardah has come and gone. Still, people in general get pessimistic about making large investments after a natural disaster. This has more to do with sentiments rather than pragmatism. However, there lies the opportunity. Due to lack of sales last month, developers are willing to give customers good deals now. Take advantage of this window of opportunity.
Keep in mind that markets recover fast after a disaster. Remember the tsunami in 2004? Demand for ECR properties plummeted soon after, but buyers who bought properties at ECR after the tsunami are flying high now as ECR is soaring. Similarly, after the 2015 floods, the market was down but quickly bounced back. Lessons to be learned.
Demonetization will only drive prices up
As we said in our blog post in November, demonetization brought about a short-term lull in demand. However, interest rates are already on their way down. As a result, demand will increase – in our estimation – in about three months time. Prices then will begin to increase. So if you’re looking to buy a home, now is the right time to do it.
As we pointed out in our November blog post, don’t wait for prices to drop more than current levels. If you get an opportunity to purchase a property for less at a distress sale, then go ahead. But remember that distress sales are a very small percentage of the market so it will be hard to find the right deals.
Construction costs are increasing, courtesy RERA Bill
In our blog post in April, we had highlighted the new changes that are taking place in the industry due to the RERA Bill. As the cost of compliance has increased, this pushes the construction cost up. This in turn will be passed on to the customer, and prices will increase further in the coming months.
No New Launches on the Anvil
Most developers are going through a temporary cash crunch currently and as a result, new launches will be pushed back. As noted above, cost of construction is already high, so the only new launches that will be seen are of high-end, ultra-luxury properties. Launches of developments in all other segments will be postponed.
When new developments are launched in the future, they will be priced higher than the current levels as higher construction costs will need to be factored in. Therefore, it is prudent to make your purchase now (within the next three months) if you’re serious about buying a new home. Be prepared for higher prices in the very near future.
Political Stability will further improve sentiments
With the passing of the former Honourable Chief Minister Jayalalithaa, Tamil Nadu’s politics has a new dynamic. Although the situation is not volatile, a new political setup will take time to instil confidence in the people and for the state’s economy to start rolling forward again. Even the current Jallikattu protests are a symptom of uncertainty in the state as far as politics is concerned.
It is this current phase of ‘wait-and-watch’ that prudent investors and homebuyers should take advantage of. A few more months down the line, a more stable political scenario – in combination with all the other factors mentioned above – will push prices up.
The above reasons are solid and clear cut. Today presents a wonderful opportunity for serious homebuyers to purchase their dream first home in Chennai. After 3 months, the entire market will very likely be very different. The current lull in the real estate market is the best opportunity to fulfil your dreams. So take action today. It could be one of the best decisions you will ever make.