Real estate has always been considered as a fruitful asset in one’s investment portfolio, for the short term, as well as long term. Property prices are an important real estate variable as they link demand and supply. It is also an indicator of the overall economic scenario of the real estate market. Price trends serve as an important tool for investment decisions for homebuyers. The time for purchasing property, price escalations, and a slump in the market are some insights which help in making valuable investment decisions. According to reports, the real estate sector is currently on the rise, with growth being driven by factors such as demographics, infrastructure, location, amenities, rise in job opportunities and the state of the economy.
1)Infrastructure development :-
Infrastructure is a major consideration for home seekers. A location that has reasonably good infrastructure has a higher perceived value to a buyer. Accordingly the property prices also increase. Facilities such as accessible road and rail transport are known to increase real estate prices significantly. For instance, when metro rail projects are announced, the localities along the route benefit immensely. Social infrastructure such as proximity to schools, hospitals and retail stores also tends to increase property rates. Investors who time the market right can get the most out of their real estate investment.
Let us understand this with an example.Pune property market is currently witnessing major demand from end-users and investors. New projects being launched in the region, are seeing major footfalls from serious buyers. This is because the upcoming IT parks, a major infrastructure project, will boost connectivity. As a result, properties located along this stretch will become more attractive and fetch better returns for the investors.
2)Upcoming or available amenities :-
The valuation of properties with better infrastructural capabilities and modern amenities are costlier than those which fail to provide proper electric connections, telephone lines, water sewerage facilities and all other infrastructure such as community centers, children parks, swimming pools, gymnasiums, parking lots or general stores. Valuation of property is clearly based on the availability of necessities and facilities connected with comfortable housing. This additional amenity can create a price difference of 10%-15%, especially in metro cities where parking in residential colonies may be a hassle. Property owners, who continue to upgrade their property, can get a better rate than the prevailing market rates.
3)Local development :-
For a property market to appreciate, it is very important that the local neighbourhood and the social infrastructure, support growth. The area where the property is located must be well-connected, easily accessible, safe and well-maintained. A scenic view, green surroundings, and proximity to landmark destinations are some other factors that result in value appreciation. Proximity to civic amenities like reputed schools, hospitals, shopping malls, employment hubs, etc. will also enable the property to appreciate at a good rate.
4)Policy changes :-
One major policy that directly impacts real estate appreciation, is lending rates. The cheaper cost of borrowing brings more buyers to the market, creating more demand and appreciation. Similarly, reductions in stamp duty rates, circle rate, GST rates, income tax benefits, etc., directly impact demand.
5)Home loan rates :-
Home loan rates can also have a remarkable effect on property prices. When interest rates for home loans are high, it reduces the demand for a property since it makes borrowers reluctant to spend extra money over the high-interest rate. Similarly, when loan interest rates are low, the demand for real estate increases.
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Mr.Siddhu Adhav.Property Consultant Since 2010