Kusum is an 35-year old working woman. She has been saving diligently to buy a house in Mumbai and has almost clinched a deal. She has shortlisted a property in the suburbs, finished the paperwork for the home loan and is ready to make the down payment. However, since demonetisation was announced, there’s been a lot of talk about its impact on the property market.
Kusum is worried because she has heard some of her colleagues discuss how the property market has ‘collapsed’ and corrected close to 20% already. Is this the right time for her to buy property?
The demonetisation move augurs well for home buyers. It’s a given that volumes in real estate will start declining as black money exits the system and prices fall in the short-term. However, Kusum should realise that it might be way too soon to be reaching a conclusion regarding price correction. There is no way to be sure that the immediate discount is the ‘fair value’. While any correction right now may look quite enticing, what if the correction is much deeper ovet the next few months?
In an uncertain environment such as this, it is not advisable for simple investors to take a call on market direction. This is her single largest investment, and being locked into something that has a chance of losing value, or the possibility of being stalled in terms of completion or paperwork and handover, due to constraints on the part of the builder, is a risk that is best avoided.
