Buying a dream home is what many aspire. Any why not when it is one of the primary needs. But with skyrocketing prices and a slow rise in household income (due to flagging economic growth), hopes of many aspirants are nipped in the bud.

Few months ago, Forbes released some interesting finding as per which an average person in Mumbai needs to shell out roughly 34 years' worth his income to buy his first home. The number of years required for someone to buy a house is execrably high. Price of houses relative to median annual incomes has been about 2.6 times in the U.S. as found by Forbes. The similar ratio for London is 7.5 times. These are rather flabbergasting statistics. In the maximum city or Mumbai (also known as the city of dreams), property prices have gone beyond reach of many.

Real state of real estate...
While in stock markets, bonds and even gold (which we Indians have flair to own) we have witnessed price corrections; in real estate the rationality doesn't seem to apply. Property prices haven't corrected much despite lacklustre conditions in the property markets. This has led to demand for houses in some of India's top cities at near historic lows. You see, the demand for residential property has slumped by huge 21% and as a result price rises have moderated to just 5%. But it is noteworthy that they have not fallen. The absorption rate is strikingly low and every major city of India has inventory of about 30-40 months. In simple words, if people start buying these houses at the current rate, it would take about 30-40 months (more than 3 years) to turnover the existing inventory. As a result of sagging demand, new project launches have gone down by nearly 30%-50% in major cities. Even Diwali season couldn't prop up property sales despite builders doling out discount offers.

What has led demand to sag?
Well, elevated interest rates regime, a slower rise in household income and shoddy infrastructure are responsible for the rumbling show of property market. Also deep pockets of builders, play of black money in real estate and ill-regulated nature of the sector are among few factors that are real culprits for stubborn property prices which has slowed demand. Moreover, the exuberant phase of the Indian equity market - as what we are in at present - is encouraging many to invest in equities and procrastinate their decision of buying their dream home.

But once interest rates start to ease, many may shift their money from a respective asset class to real estate, which may lead to see some uptick in the property sales.

Play of black money in real estate..
Many of you must have been left dumbstruck after seeing just three names in the "so called" list of people who were alleged for having stashed money illegally into foreign bank accounts. NDA Government had lambasted previous Governments for gaining little success in getting black money back to Indian shores. But the present NDA Government hasn't either taken tough measures (citing some legal technicalities) and thus it looks farfetched that India would achieve any success in taking punitive action against money hoarders. On the contrary, more the time is elapsed in the process, greater are the chances that, black money may flow elsewhere from the bank accounts. There is also a possibility that it might come to India by other means. Unusual rise in gold imports during September 2014 caused many to suspect that black money stashed outside India is being sent in the form of gold imports.

Recently, Government loosened Foreign Direct Investment (FDI) norms for real estate sector. The Government lowered the requirement of minimum floor area to 20,000 square meter from the previous 50,000 square meter for attracting FDI. With this, there is now a risk that black money held in foreign banks could be channelized in Indian real estate sector.

So, should you buy a property right now?
PersonalFN has always believed that, if you are buying a primary house i.e. to live in with your family, any time is a good time. We recognise the fact that in India buying a house is filled with emotions, and more so, when one is moving in with a family, making it a home. Nevertheless, while you are thinking of buying your dream home, please take into account financial and non-financial factors (individual needs and aspirations), to make a prudent and feasible choice for your and family's wellbeing. So, if you are taking a home loan ensure you have assessed your financial circumstances well, so as to take a wise decision. If you cannot afford to buy a dream house immediately to live in, explore the options of staying on rent. Remember, whether you are buying a house or staying on rent, you must take a wise decision.

PersonalFN is also of the view that, if you want to invest in property and not buying a house to live in, one should think again considering the current level of unsold properties and existing nitty-gritties. Don't be under the impression that real estate prices never fall. You see, considering that while investing in real estate you are parting with a huge portion, even a sideways movement of property rates could hurt your overall portfolio assuming you are overweight on real estate. You see, allocating your assets wisely across asset classes and investing in right avenues therein will be the key to your success in investing.

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