Is it the right time to buy a house? Apr 17, 2009

Is it the right time to buy a house? i

April 17, 2009

Weekly Facts
	Close	Change
BSE Sensex	10,947.40	143.54
Re/US$	49.77	0.27
Gold Rs/10g	14,330.00	25.00
Brent ($/BBL)	51.58	1.07

Weekly change as onApril 16, 2009

Is it the right time to buy a house?

Impact

Despite price cuts (which were in the range of 15%-20%) and falling interest rates, the demand has not picked up in the real estate market. The market is flooded with residential property especially in cities like Mumbai and Gurgaon. However, homebuyers are still adopting a wait and watch policy as they anticipate a further fall in prices. Banks have slashed home loan rates and are flooded with many property enquiries on daily basis. However, there has been a poor conversion rate.

The property rates may decline but no one knows to what extent. The fall in rates may not be uniform; it will most likely vary from place to place.

Hence, individuals who are planning to buy a house should now start searching seriously and turn their plans into realty.

Deficits to increase long-term interest rates

Impact

Lower tax collection and increase in government spending (on stimulus measures, subsidies among others) is surging India’s fiscal deficit. There is likely to be a shortfall of more than Rs 25,000 crores.

This deficit needs to be funded which will lead to rising interest rate regime over the long-term. This in turn may impact the gilt segment negatively.

Short-term landing rates may decline further

Impact

There is limited demand for bank loans as companies have put their financial-news-simplifieds on hold. This in turn has left banks with excess liquidity in their kitty. As a result, banks have to park huge sum of money with RBI. Besides, they are also trying to channelise their resources by investing in Mutual funds. But incidentally, some of the Mutual funds have become reluctant in accepting fresh subscription from banks due to lack of good investment avenues in the market. As another measure, banks are now trying to discourage bulk deposits (more than Rs 1 crore) from investors by reducing rates.

The excess liquidity could result in further decline in interest rates. This could make it cheaper for individuals and corporates to access loans at cheaper rates.

Relief for Small and rural investors

Impact

RBI is considering the proposal of doing away with (Permanent Account Number) PAN for smaller SIPs. PAN is compulsory for making investments in mutual funds irrespective of the subscription amount. This move will especially benefit small and rural investors, who do not have a PAN card and want to invest in smaller amounts via SIP.

This will increase the target audience for fund houses and open investment avenues for investors, who were earlier reluctant to apply due to absence of PAN card.

Diversify Portfolio says SEBI

Impact

SEBI has capped the mutual fund’s exposure to money market papers of a single issuer at 30% of net assets. Simply put, from now on, no fund can have more than 30% exposure in a single company’s papers such as Commercial Papers (CP) and Corporate Deposits (CD). This limit is not applicable to investments in G-sec, T-bills and CBLO.

The step is directed towards reducing the concentration risk incase the issuer defaults.

Now, ATMs for disabled individuals

Impact

After the free ATM withdrawals from any bank’s ATM, RBI has directed banks to ensure that ATMs are easily accessible to persons with disabilities. For visually impaired individuals, atleast one third of new ATMs should have speaking softwares with Braille keypads. For wheelchair users, ATMs and bank branches should have ramps to allow easy access.

This is indeed a welcome move as it will facilitate ease of transactions for physically challenged individuals.

IN THIS ISSUE

Is it the right time to buy a house?
Deficits to increase long-term interest rates
Short-term landing rates may decline further
Relief for Small and rural investors
Diversify Portfolio says SEBI
Now, ATMs for disabled individuals

FORWARD TO A FRIEND

Think you know someone that will enjoy this email? Why not send it to a friend?

QUOTE OF THE WEEK

Quote: "An asset is a thing which puts money in my pocket; a liability is a thing which takes money out of my pocket"

– Robert Kiyosaki

ATTENTION WOMEN!

************

We bring you something invaluable, interesting, exclusive...and FREE!

Click here to know more...

Disclaimer:

This newsletter is for Private Circulation only and not for sale, is only for information purposes and Quantum Information Services Limited (PersonalFN) is not providing any professional/investment advice through it and, does not constitute or is not intended to constitute an offer to buy or sell, or a solicitation to an offer to buy or sell financial products, units or securities. PersonalFN disclaims warranty of any kind, whether express or implied, as to any matter/content contained in this newsletter, including without limitation the implied warranties of merchantability and fitness for a particular purpose. PersonalFN and its subsidiaries / affiliates / sponsors / trustee or their officers, employees, personnel, directors will not be responsible for any direct/indirect loss or liability incurred by the user as a consequence of his or any other person on his behalf taking any investment decisions based on the contents of this newsletter. Use of this newsletter is at the user's own risk. The user must make his own investment decisions based on his specific investment objective and financial position and using such independent advisors as he believes necessary. PersonalFN does not warrant completeness or accuracy of any information published in this newsletter. All intellectual property rights emerging from this newsletter are and shall remain with PersonalFN. This newsletter is for your personal use and you shall not resell, copy, or redistribute this newsletter, or use it for any commercial purpose.