The downside of the wait-and-watch syndrome

Buyer paralysis – or, as it is popularly known these days, the ‘wait-and-watch’ syndrome – is one the main reasons today why aspiring home owners do not make their move. There are various reasons why people prefer to sit on the fence rather than in their dream home. Probably the most significant one is negative market messaging via various information channels.

In India today, fence-sitting buyers are waiting for one of two things to happen – for property prices to come tumbling down, and for home loan interest rates to be brought so low as to become irresistible. Of these two factors, a correction in property prices would definitely be the stronger incentive. Obviously, a combination of both would be the most preferred scenario.

There are also other reasons why people who long to own a home do not take the plunge. For instance, they may have become confused by conflicting objectives and are looking at the whole issue of home ownership from an investor’s viewpoint. Such a mind-set results in people either waiting for the right ‘entry point’ (the lowest point to which prices will drop) or worrying about the ‘non-liquid’ nature of property (gold or stocks can be turned into cash much faster if a financial crisis arises).

Another reason for buyer paralysis can be the expectations one has set with regards to the desirable size for a home. Many aspiring home buyers feel that their dream home should be large enough to make their own senses boggle, and the source of envy for all their friends and relatives. Since homes beyond a certain size are beyond their purchasing power, they plan to save until they have enough to make a sizable down payment.

For homebuyers-in-waiting, a deeper understanding of the dynamics of the real estate market – and the various options open to them – can often bring them closer to finally achieving their goals:

*Price corrections do not happen the way most people imagine, if they happen at all. In the first place, they do not take place uniformly across all cities, but only in cities – and more importantly, in locations – where there is too much stock and no sales. If sales are taking place, even at a slower rate, prices will not drop. This is, in fact, one of the main reasons why investment in the right property at the right location is such a safe bet.

* Home loan rates are decided by the state of the economy – banks cannot arbitrarily bring down interest rates, even if doing so would increase disbursals and therefore their own business. When the economy improves, so do lending norms. The factors that positively affect economic performance cannot be willed into motion, but depend on a huge plethora of macro factors. Moreover, the monthly outgoings on an existing home loan will automatically decrease when interest rates come down (provided that the loan is on a floating and not fixed rate of interest).

* Home purchase and property investment are two very separate concepts. A home is one of the things we buy because we intend to put them to use and make our lives more secure and comfortable. An investment property is something we buy in order to sell it at a sizable profit a few years down the line, and to rent it out until then. Homeowners view their homes as a source of stability and security, while investors see their holdings as tradable commodities.

* Size DOES matter – but not all that much. If you are in the position to buy a 2 BHK in a good location today, you can be assured that it will appreciate in value. Assuming that you expect your income to grow steadily as well, you will always be able to upgrade to a bigger home in a few years. The appreciating nature of well-chosen property also means that waiting until you can make that hefty down-payment on a larger home may not work simply because the prices for such homes would also have increased.

Like all mind-sets, the wait-and-watch stance can become a chronic one for no better reason than that it has become a habit. The decision to postpone the purchase of a home should not be on the basis of limited information. In fact, such a course can be self-defeating and put your dream home further and further out of reach.
(The writer is Managing Director of Pride Group)