Wait! Property prices to fall further!

Here's an indepth article about real estate prices in India, from rediff.

Few points from the article,
The recent housing boom was riding on the back of four broad factors -- rising incomes, job security, low property prices and interest rates, and tax benefits associated with buying a house.

A home loan is a person's show of confidence in his income earning capacity over the long term. As the demand for high-ticket loans falls, it also signifies a dip in the confidence in job security and future salary increments.

Says an industry analyst: "Major players in the premium segment have an operating margin of 50-55 per cent. On the contrary, in the mid-segment the margin is around 35 per cent."

"A minimum of 25 per cent correction can be expected. Correction in Tier-II and Tier-III cities will happen a little more. Even cities like Mumbai could see significant price correction," adds Mavani.

So, read on!

Advantages of investing in Real-estate

Investing in real-estate, or more specifically, on a house or flat, is something that interests the salaried class very much. Though the scenario appears bleak due to the recent CRR and Repo rate hike by RBI (which could lead to an increase in home loan rates), buying a real-estate is something that is still worth pondering.

Real-estate has certain advantages that other investment options don’t have. Let’s have a look at few of those advantages and see why investing in real-estate is still a better option.

Advantages
1) Property prices, in general, don’t show a downward trend, especially if selected at a location where there is ample scope for development. In such cases, it becomes a safer investment.
2) The rate at which real-estate prices increase sometimes even beat the stock market.
3) Inflation generally doesn’t affect real-estate (house/flat) returns because the costs of construction materials increase every year (with inflation). As a result, the cost of buying a house/flat is always going to increase with time. Hence properties will most probably be available at a higher price tomorrow.
4) Investing in a ready to occupy house/flat could save the money that you spend on a rented house. Till selling the flat, you can live in the flat and save on the rent amount.
5) If you are taking a home loan for buying the house/flat, the EMI could be afforded with 1) the money you otherwise pay as rent and 2) the tax savings (hence increased take home salary) you get on home loans.

Tax Savings
When you take a home loan, there are two ways with which you could save tax.
1) The principal component of the EMI is eligible for a deduction of up to 100,000 under Section 80C of Income Tax Act 1961. This is the same section under which Provident Fund, Insurance Premiums etc. are claimed.
2) The interest component of EMI is exempted up to 150,000.
3) If both husband and wife are working, then both can claim these exemptions for the same property, provided they have taken a joint loan and divide the principal and interest component of EMI among each other.