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Indian Real Estate News
Lower inflation good for property buyers
Source: Times Property in The Times of India, Bangalore Apr 19, 2012
The double bonanza of inflation numbers and the central bank's repo rate cut have given ample reasons for home loan borrowers to rejoice this week. The inflation rate is a general rise in prices measured against a standard level of purchasing power.

Over the past few months, an unbridled inflation rate had pushed the costs of everything from food items to raw materials for industries in an upward direction. Inflation gave little reason for prospective homeowners to cheer. Property prices shot upwards as costs of steel and cement increased.

Untamed inflation chokes economic activity and growth. The Reserve Bank of India (RBI) has the twin responsibility of keeping inflation anchored and in control while accelerating the pace of economic growth. Though still classified as high, inflation expectations moderated in the fourth quarter of 2011-12. The numbers show signs of softening in the days ahead. This signals a good time to purchase property.

After 13 continuous hikes in the policy rates, the RBI in its annual monetary policy for 2012-13 slashed the policy rates by 50 basis points. The repo rate (at which banks borrow money from the RBI) is eight percent from 8.50 percent. The reverse repo rate (at which RBI borrows money from banks) is now at seven percent from 7.50 percent. The cash reserve ratio (CRR) (the portion of deposits banks keep with the RBI) was left unchanged at 4.75 percent. A persistent downward journey of inflation and interest rates will kindle sales of property.

A low inflation level spurs economic growth and employment. Costs of raw material for the construction industry come down. A lower inflation level translates into a lesser monthly expenditure and consequently larger monthly savings or disposable income.

Here are a few tips for property buyers to tackle inflation:

Build a contingency fund
In an inflationary economy, there is a general increase in price levels. Do not be caught off guard by rising inflation and interest rates that could squeeze your purse. Build a contingency or buffer fund and make savings a regular monthly affair despite all your debts.

Manage expenses
Systematically lowering consumption costs of the family till the duration of high costs eases is the first logical step. Avoid defaulting on loan repayments even if it means sacrificing your annual vacation or cutting down on recreation expenses.
Small lifestyle adjustments like car pooling or taking the public transport could save you a few thousand rupees in these times of high petrol costs.

Manage risk
Invest in moderate risk products as a hedge against inflation. Saving well today will help you make the downpayment on your home.
Cut down on expenditure and focus on investing.

Tag: Real estate in india, property in india, Indian properties
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