BUSINESS
Should one buy property post-lockdown?
Due to the COVID-19 pandemic, an economic crisis engendering high volatility in the capital markets is leading to investors losing their hard-earned money, at least for the time being. Most of the sectors have been badly affected due to the COVID-19 economic crisis
Due to the COVID-19 pandemic, an economic crisis engendering high volatility in the capital markets is leading to investors losing their hard-earned money, at least for the time being. Most of the sectors have been badly affected due to the COVID-19 economic crisis. According to analysts, property prices after have declined by two to nine per cent after March, when the lockdown first came into effect. Even though the property prices have come down, the pandemic and the resultant lockdown have put a brake on people’s aspirations of owning a house of their own.
Among those affected are homebuyers who decided to buy a property in the new financial year by taking a home loan. But these people are now no longer sure if they would be able to afford the equated monthly investments (EMIs). Their reasons vary, ranging from layoffs, lack of business earnings to salary cuts, among others. The real estate sector has been hit by the lockdown, as construction activity all but came to a grinding halt with looming uncertainty over project completion dates.
Although the Union Finance Minister, Nirmala Sitharaman, took major steps to contain the fallout, still there are certain factors beyond her control as well, including lack of available manpower at construction sites.
The macro-economic uncertainty coupled with job cuts has left the buyers confused. We have come up with a piece of consolidated advice for homebuyers, if they are after owning a property in the post-lockdown economic scenario.
What a homebuyer should do?
- It would be best for the potential buyer with capital to wait for a couple of months and keep a close watch over the liquidity situation of the market.
- “Supply chain issues, labour availability and issues of raising any form of institutional capital will have their impact on projects and development timeline. Therefore, it would be prudent for buyers to pick up units in completed projects or wait till the construction activity on the site is resumed when it comes to under-construction projects,” says Ajay Sharma, Managing Director, Valuations (India) at Colliers International.
- It is prudent for a buyer to stick with prominent developers with a good track record with both customers and financial institutions. This will ensure safety in capital invested by them. “Given that residential pricing will be under pressure, good deals will come the buyer’s way but the timing of the buy should be prudent and not delayed in hope of more discounted pricing,” added Sharma.
- Buyers should evaluate their financial position, both current and in the next five years. They should carefully gauge if they are ready to take on any more loan liability, especially if they are solely dependent on monthly income from jobs.
- It would be important that they access all information from the Real Estate Regulatory Authority (RERA) sources to evaluate any buying-decision.
- It would be better if they take professional opinions from registered RERA brokers for a property before embarking on the decision to buy a project.
- “Buyers should closely work with their financial partner (banks or NBFCs) to obtain all information regarding the project they are evaluating,” said Sharma.
- Also, buyers should keep a sharp eye out for interest rates and take advantage of low-interest regimes at the same time. According to Adhil Shetty, CEO, BankBazaar, “With interests at an all-time low, this is a good time to buy a house. We’re currently in a low inflation period, and there are few triggers for an interest rate spike. Therefore, with rates falling regularly, a repo-linked loan will work to the borrower’s advantage.”
- A ready to move-in flat is more advisable to buy as compared to under-construction ones. Avoid putting your money into incomplete projects.
- Check the builders’ detail and then go and buy ready to move-in flats. Check all RERA rules before buying a flat. “Opt for a longer tenure if possible. While this means a higher interest rate, it means smaller EMIs. You can start putting together a small kitty towards your home loan, which you can pre-pay from time to time. This will reduce the impact of your increased tenure,” adds Shetty.
- For example, assume a loan of Rs 40 lakh at 8 per cent interest. For a 20-year loan, you will be paying an interest of Rs 40.3 lakh. For the same loan, you will have to pay an interest of Rs 65.7 lakh if the tenure is 30 years. However, a prepayment of Rs five lakh at the end of the third year will bring down the interest payable to Rs 41 lakh. Use a calculator to understand how you can prepay your loan to get maximum benefits.
- Consider opting for a smaller house with fewer premium amenities. This will bring down the costs for now. Over time, you can upgrade to a bigger premium home.
- With respect to any purchase decision, it is advisable to bring in financial consultant and take informed calls based on one’s ability to take liabilities.
- If the buyer is to dispose of a property to buy a new one, it would be best to complete the deal before signing on for a new apartment. This will ensure cash flow continuity and no hard surprises.
- It’s a common practice to monetise long-term savings like PPF to finance buying of the property, but in current times, it would be sensible to leave at least 9-12 months equivalent of monthly income in savings before buying a new property.
- Fiscal prudence should be paramount and it will help in making the right decisions for buying property.
Pandemic affect from a buyer’s perspective:
- There will be two types of home buyers after the lockdown period, those who have capital at hand and those who have secured job but need a home loan, says Sharma.
- The former will look for properties that are complete and compliant from all perspectives as it would be a safe investment though buy-in price may not be much discounted.
- Investors will have to look at buying for the appreciation of capital value with low consideration for yields that are already very low
- The push of government for rental housing might see investment into residential units. Potential buyers could be at an advantage in view of the financial sops that could result in decent returns.
- Buyers will need to carefully assess two risks- liability risk and property risk. Liability risk will entail the loan taking ability and servicing ability in light of macro-economic issues.
- Property risks will entail the development stage, progress, solvency of the developer and the ability to complete the project. A delay in raising capital and progress in work will spill over into liability risk and buyers will carefully look at de-risking themselves.
- Buyers’ cautious approach will defer their buying and preference shift depending on the pricing of the units. Both buyer types will expect discounts from developers and push for box prices that could land them a good deal. “A fair amount of paperwork and verification are also involved. So, also utilise this time to keep these ready, says Shetty.
Things to keep in mind post-COVID-19 lockdown:
- It is important that a potential buyer of residential real estate have their PPEs on at all times when going for on-site inspection.
- It is best to wear gloves and avoid touching surfaces to minimise transmission risks.
- It would be advisable to carry out all documentation online.
- With respect to any purchase decision, it is advisable to bring in a financial consultant and take informed calls based on one’s ability to take liabilities. “If the buyer is to dispose a property to buy new one, it would be best to complete the deal before signing on for a new apartment. This will ensure cash flow continuity and no hard surprises,” says Sharma.
- It is a common practice to monetise long term savings like PPF to finance buying of property but in current times it would be sensible to leave at least 9-12 months equivalent of monthly income in savings.
- Fiscal prudence should be paramount and it will help in making the right decision for buying property.
- Make sure you have a good credit score. Check there are no misses and pay special attention to ensure that you pay your bills on time in full.
- There will be a certain amount of credit tightening, and a good credit score can go a long way in ensuring that you get a good deal on your loan.
- Increase your emergency fund, so that it covers six months to an year of salary as a security. This will ensure you have more funds at hand in case of an emergency. This also gives you sufficient time to get another job in case of a job loss.
- Read and understand all the property-related documents before you finalise your purchase. Take legal help if required. This will save you heartache in the future.
- It would be anywhere between a couple of weeks to a couple of months before you can actually go ahead with the purchase. Take this time to understand how home loans work, especially external benchmark-linked ones.
- Different banks have different loan qualification criteria such as the borrower’s age, job profile, employment stability, credit history and others. Use calculators and eligibility charts to understand your eligibility with a particular lender to avail the best possible offers.
- Lenders set terms and conditions pertaining to the repayment of home loans. So, you need to clarify the terms related to settlement/foreclosing the outstanding amount, transferring the balance to another lender’s account, pre-paying a part or full amount of home loan before finalising a lender.
Entrepreneurs
The Power Couple of Instagram: Sara’s Journey to 5.5M Followers
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Collaborations underpin all of Sara’s accomplishments. For example, in a recently collaborated project with Garnier, one of her social media reels had nearly 4 million views with 130,000 interactions. Similarly, in another collaboration with Temu, such an engagement was conducted in an informative and entertaining manner, thus it gained an impressive 7.7 million views and about 500,000 engagements. These above collaborations represented the potential of marrying creativity with brand messages and finally producing something authentic and relatable. The synergy of relating to her husband, Ghaith, has that effect for Sara. A build-up in her persona comes about through the collaboration bestowed upon her with some quality that makes not only aesthetically pleasing but also emotionally meaningful. While comedy up to poignant moments, the dynamic between Sara and her husband, Ghaith, is something that essentially encompasses Sara’s brand. Their connection to her talents allows her to build a followership that enjoys an impressive 80% credibility score—a notable achievement, undoubtedly, within the realms of influencers.
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Entrepreneurs
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Varsity Tutors boasts an impressive record: three million hours of live instruction delivered to date. Its strong showing does, in fact reflect the capacity to be flexible and grow within a highly dynamic educational landscape. The platform offers many different subjects through its extensive network of experts, giving any learner the chance to find an appropriate match for their goals. The reach of the program worldwide resonates with diverse communities everywhere-from students and professionals in multicultural Dubai, all of whom are seeking top-notch learning solutions to thrive in a competitive environment.
Innovation is one of the leading factors for Varsity Tutors’ success. For instance, learning in its mobile app is at the fingertips of the user: a user can schedule sessions, view resources, and interact with his instructor quite easily. This convenience has been a game-changer for many busy professionals and tight-scheduled students. Dubai’s bustling educational and professional scene has found synergy with Varsity Tutors’ vision. The platform aligns with the city’s goal of fostering a knowledge-based economy, equipping its residents with the tools needed to succeed in a globalized world. With its emphasis on personalized learning, Varsity Tutors supports Dubai’s mission to nurture talent and encourage lifelong learning.
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Entrepreneurs
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Ziad Ghosn, however, goes beyond being an entrepreneur; instead, he is a visionary who moulds industries in the GCC. Having been around over 15 years and immersed in the intricacies of the UAE market, Ghosn has converted Nomadic Capital into a thriving hub of innovation, incubating game-changing ventures in fields such as technology, food and beverage, and healthcare. Ghosn, along with his co-founder wife, Stephanie Khouri, is on the forefront of debunking traditional business models to herald smarter and more efficient solutions. He is the epitome of innovation and resilience.
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Ghosn, alongside his wife Stephanie Khouri, has partnered with Nomadic Capital Limited since 2017. Founded on a vision to introduce innovation in the GCC region, this start-up aims to tap into untapped markets by offering services either incu-bating potential ideas or undertaking their own ground-breaking initiatives. Collaboration is what made Nomadic Capital a leader in fostering innovation and tackling modern business challenges. Pushdot was the mobile application which Nomadic Capital produced and which earned the company a place among the top 50 start-ups to watch in the UAE. The app has been acclaimed within the region and has further received international accolades such as the Appy Awards in New York. This recognition has, therefore, underlined the app’s capability to update business needs through innovative digital tools.
Ghosn’s initiatives cover much more than mobile technology. Operating Nomadic Capital, he has done much to create opportunities in the food and drink sector, as, with his team, he was granted the International Business Excellence Award for Innovation in F&B. Among the concepts of the firm, of great significance is the Automat, a fast-food restaurant model whereby hot meals and beverages are dispensed via vending machines. Such a concept not only offers convenience but also addresses efficiency and operational issues in the industry.
Recognizing the potential of technological integration with healthcare, Ghosn has turned his attention to this booming industry recently. The focus of his last efforts has been on providing better patient care and streamlining business operations through advanced digital features. Through these gaps in traditional models for healthcare, Ghosn manages to deliver smarter solutions that are more accessible and promise to redefine the industry in the GCC and beyond.
The entrepreneurial pursuits of Ziad Ghosn reflect the kind of relentless drive for innovation and adaptation to modern business needs. His ability to turn from retail automation towards health care reveals the visionary of an entrepreneur who stands out in today’s competitive landscape. Through leveraging cutting-edge technology and deep market insights, Ghosn continues making opportunities that challenge conventional norms and redefine possibilities.
Through his firm Nomadic Capital, Ghosn gives more than just ideas to life; he creates a culture of innovation that resonates across industries. His entrepreneurial success is a blueprint for would-be business leaders, outlining how strategic vision and adaptability lead to transformative outcomes.
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