Real Estate is one of the most buzzing words in India for every man. Yes, you read it right. Any man, even one who has just got an offer letter from a company, dreams of buying a home someday. A home which will shelter him and his family.
Buying a home is probably the single biggest decision (Financially) that a Man takes in his life. Buying a home is not an easy decision. It not only involves a lot of time and effort in short-listing a prospective house but also involves a huge investment. With real estate prices booming over the past 5 to 10 years in India, especially in cities like Chennai, Mumbai etc. buying a house involves an investment that runs into Lakhs. Believe me or not, for most people in the working class (you and me of course) lakhs is still a large sum of money. I wouldn’t blame you if you are saying “Come on man, I am not a politician to treat crores like hundreds!!!”
Ok, coming back to the topic, this article is about the Market Outlook for the Real Estate Sector (Residential Properties) in India.
The year that has been – 2011:
2011 has been a significant year for the Residential Real Estate Market in all aspects. All of the below aspects have increased:
a. Cost of Land
b. Cost of Construction Materials (Cement, Sand, Iron etc)
c. Cost of Loans (Rate of Interest)
d. Cost of Labour
Because of this four-fold pressure, cost of residential property has gone up significantly in 2011. However, the looming world financial crisis, Eurozone problems and inflation have struck a dent in this growth towards the second half of 2011. Though prices of properties by top realtors in prime locations haven’t come down, prices in other localities have corrected by around 5% or so towards the last quarter of 2011.
Outlook for the year – 2012:
2012 promises to be an exciting year and property prices (esp. residential properties) are expected to go up this year too. The following are some reasons why the residential property prices will head northwards this year too…
1. Demand for Affordable Housing
2. Growth in Tier II and Tier III Cities/Metro Suburbs
3. Interest Rate Movement
Demand for Affordable Housing
Owning a House is still a dream for a majority of the working class population in our country. With rapid industrialization and growth throughout the country, the demand for houses is bound to increase. Realtors who can build cost-effective homes in good localities are bound to reap big rewards in terms of high customer interest. Everyone needs a house to stay and owning a house is a decision everyone wants to make, provided they get a good deal. So, the demand is going to be there and whenever there is a demand for a certain product, its price is bound to go up. Isn’t it???
Before we begin, by Tier II and Tier III cities I am referring to the cities like Coimbatore, Vishakapatnam, Kochi etc that have been growing at a very rapid pace over the past few years. Though they are not metros, industries have been favouring these cities due to lower costs (in all aspects) than Metros. By Suburbs I am referring to the areas surrounding a Metro City and not the actual city itself.
Growth in Tier II and Tier III Cities/Metro Suburbs
With cost of land sky-rocketing in Metros Real Estate Developers are turning their attention to Tier II & III Cities and also Suburban areas of Metros. This is because, the cost of land in these areas is comparatively cheaper than Metros and prime locations in Cities. Also, most home buyers look for cost-effective homes and cant really afford property at the heart of the city. So, this is the area where the real estate buyers market is and that is what the construction company’s are trying to tap into.
With Major Industries and company’s opening up offices in Tier II & III or Suburban areas, the demand for residential properties in the surrounding areas is bound to rise.
A simple example: In Chennai, when I was in School, areas like Guduvanchery, Urappakkam etc were considered remote places. At that time, price of one ground (2400 sq feet) land there was only as much as what realtors expect us to pay for a single square feet now. That is the kind of growth property prices has seen.
Interest Rate Movement
Loan Interest Rates have been altered by the RBI numerous times since 2012. To be exact, the RBI has changed it 13 times since March 2010. That is roughly once every two months and most of these have been a Northward Movement (Increase). But, over the past few months the rates haven’t changed much and experts forecast that the Interest rates are expected to have a Southward Movement (Decrease). A decrease in interest rates will ease the liquidity condition of not only buyers but also the builders. This will definitely help the housing demand.
Overall, the year 2012 is going to be an interesting and exciting year for the Residential Market in India. If you are someone who has been wanting to buy a home “Now is the Time, my Friend”…
Happy Home Buying!!!