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Tata Capital > Blog > Loan for Home > Should You Buy a House in 2020?

Loan for Home

Should You Buy a House in 2020?

Should You Buy a House in 2020?

With the outbreak of the Coronavirus pandemic, the housing market which was already in a tough position due to weak demand and high inventory, plummeted even further. It may make sense to buy real estate now when the prices are low, but you must exercise caution. If you are looking to buy a house in 2020, consider the points discussed below before you make your decision.

Reduced Affordability

Affordability has taken a severe blow, as many people have had to take significant pay cuts and others had to lose their jobs altogether.  Many wealth managers are advising their clients to preserve cash and to avoid spending, wherever possible. This has impacted consumer sentiment adversely.

Weakening Consumer Sentiment

According to a survey conducted by the RBI, consumer confidence started to collapse in May. The Current Situation Index and the Future Expectations Index, both fell substantially. These indices gauge people’s perceptions about employment, price level, income, spending, and the overall economic situation. 

Increased Uncertainty

Life has never been more uncertain for employees, with a pay cut or job loss always looming around the corner.  Even for those who have some stability and job security, there is no way to tell when their jobs will require a physical presence in the workplace again.  Renters have more flexibility in that regard, as they can easily move for a new job to get a pay raise. Or they can move to a less expensive neighborhood if funds are running low. 

A job loss or pay cut might even drive homeowners to sell the assets in their retirement accounts to pay the mortgage. They may even have to sell these assets at their lowest value, which can be a grave financial mistake. During the Great Recession, the worst-hit households were those who lost their jobs but still had to pay the mortgage on their homes. Whereas renters simply moved to cheaper places.

Additional Read: 5 Reasons to get Home Loans in 2020

No Uniformity in Prices                       

In an online event organized by Naredco in June, the Union Railways and Commerce Minister, Piyush Goyal was reportedly asking builders to clear unsold units by slashing the prices. Statements like this are setting unrealistic expectations among buyers. Experts advise buyers to not read too much into Goyal’s statement. The comment was contextual and should be treated as hard-lined guidance on price cuts. An imbalance in the debt-equity ratio is nothing new among developers. The comment was directed towards overleveraged developers, asking them to not seek further debt but instead to expedite sales by rationalizing prices. Prices may drop only in places where there is oversupply along with weaker fundamentals. But in preferred locations where quality projects are being undertaken by developers who are not stressed, there may be no revision in prices.

But if you are still convinced that this is the right time to buy a house, at least consider the following tips before you buy.

  • Make sure you have a stable job or another source of income.
  • Make sure you have very little debt or no debt at all.
  • Make sure you have enough savings and a good credit score.
  • Make sure you don’t have to make other big purchases in the foreseeable future.

Additional Read: Income Tax Benefits on Home Loan for the Year 2020

For home loans at attractive interest rates and minimal documentation, visit Tata Capital. With years of experience in the industry and dedicated after-sales services and support, Tata Capital is the right home loan provider for you.

Visit our website to assess your home loan eligibility and use our home loan EMI calculator.

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