Is it Time for Indian Middle Class to Say “Home Sweet Home”?
Whatever is the case with Indian politics, one thing is sure though that there is an underlying consensus among all political parties that economic reform is the way to come out of that Nehruvian economic development which saw a sustained medium rate of Gross Domestic Product (GDP) growth also known in Indian economic folklore as Hindu Rate of Growth!
This consensus thing has become more pronounced when Left Front ruled state government in West Bengal has been trying hard to find vast spaces of land for big industrial houses interested in investing billions of $s in the state. Ironically, there is someone who is in their way of industrializing Bengal - it is their bête noire - Mamata Banerjee of the Trinamul Congress party who is doing the same same as the left parties did in the 60’s and 70’s - i.e. protect the farmlands which form most part of Bengal.
But I am not here for Bengal, I am here to talk about the new opportunities that has been brought about by economic reforms and rapid GDP growth over last 10 years or so.
Everyone is aware that Indian middle class is one of the largest in the world with huge level of purchasing power and MNCs come to India for them. There are two groups though. One group is western educated, sauvé and highly urban working in the private sector with high salaries. The other group is semi-urban, traditionally educated, middle aged and look for security in government jobs. But members of both groups has one thing in common - ‘to own a house of their own’. While the first group had advantages so far to fulfill their dreams with their fat pay packages from so called sunshine industries (IT, ITes, Bio-technology), the second group had to think a lot before they took the plunge due to their low pay slips.
Some recent developments - both in the domestic and international scenarios have shifted the balance in this equation. The world economic meltdown caused by the now infamous US ‘Sub-Prime Crisis’ has affected the real estate and financial services sector more than anything else. With billions of square feet of real estate property lying vacant and liquidity crunch engulfing the world market, realty sector is not going to get hot in the near foreseeable future. Although most governments have taken several steps to infuse trillions of $s to come out of crisis, the market as a whole is still in the doldrums and real estate sector has simply crashed.
This is what I am talking about - a golden opportunity for all those who had to think ten times before owning a house in earlier scenarios. There are three plus points -
- Keeping with the rest of the world, Indian realty sector has also crashed.
- Indian banks have not been hurt that much with world liquidity crunch and with active initiatives by several branches of the central government through policy changes, the banking industry has been involved in home loan modification by way of rate cuts.
- The central government and most state governments have revised the pay structure of their employees with much higher pay so as to give the benefit of fast economic growth during last 10 years or so.
It is pure circumstantial that has brought about this opportunity. Now, a government servant is more suited to own a home or flat than someone working in the private sector. Employees in the private sector live in constant fear of loosing their jobs, while a government employee has job security. Now with more pay at a time when the sector is down and much cheaper home loans - “Is it time for Indian Middle Class to Say “Home Sweet Home”?
My answer is definitely YES.
Of course one has to be careful in choosing the right bank with the right home loan plan that suits the individual. Due to fierce competitions amongst banks, they offer different types of housing loan products and market it as better than all other products. There goes the catch - which one is good for me !
The US Sub-Prime crisis would not have happened if the government had enough regulatory guidelines on banks and financial institutions who were engaged in constant home loan modification to show one-upmanship. With hundreds of billions of $ being poured into the realty sector by financial services companies, insurance sector, banking industry - the ‘chain reaction’ to the crisis has been catastropic to say the least.
So, when you choose the biggest loans of your life, take your time, study all ‘Term & Conditions’ of products, study the pros and cons of every loans available in the market, do some research on the finances of the banks and then go for it.
One advise though - don’t fall into the ‘Cheapest Loans Available’ trap. Calculate everything before you decide which one is cheapest and which are not. And like all government employees looking for security rather than riches via speculation - I would suggest Fixed Rates rather than fluctuating rates - because it is for long-term duration ( 15-20 years) and anything might happen during this time. 
So safety first. 