Find out why Property Rates Might Never Come Down Again

Why Property Rates Might Never Come Down Again ????

This is not good news at all especially to those who have been sitting on the fence awaiting the much predicted correction to happen in the property markets. There is a feeling that the property markets are high due to an artificial bubble created by the real estate developers and others concerned with the property market.

This could be true to an extent but if one looks closely at the facts there is more than meets the eye.

The cost of living has gone up considerably. Imagine your humble Vada Pav or the really cheap vegatables around 10 years ago and compare their prices today. The price has increased multiple times.

Is it artificial or is it due to rising costs of transportation, raw materials, cooking gas, labour costs, fuel costs, taxes, etc.???

Now let us look closely at the real estate price trends and patterns over the years.

1. The raw material for property development is Land and it is irreplaceable. That means with each passing day land gets dearer and scarcier.

2. As per a recent survey, the cost of overall construction has been increasing with each passing day by day and the calculations conclude that the difference in the cost of construction is as high as 40% in the last two years. Steel, cement, sand, labour charges, allied services, permissions and other construction materials and the overall taxes pertaining to them have gone up significantly. All these additional costs get passed on to the customers ultimately and are the major factors preventing the reduction of property prices.

3. Urban centres are expanding by the minute and as education, healthcare, communication reaches out to everyone, a constant flow of people is moving towards the cities. With a lot of growth and employment potential the metros, Tier I , Tier II, Tier III cities, towns are witnessing a huge demand for residential, commercial spaces. The demand for real estate is always there. Many times it becomes dormant due to market sentiments but the truth is it is ever present. This factor keeps the real estate industry alive and kicking as there is an organic demand from the ever grwing population of our country.

Migration has  increased in the last couple of years, with buyers moving on the higher side and are eager to invest and earn surplus from the real estate sector. Which is why maximum people these days are following the same habit of buying a property to earn maximum profit which no other commodity in the world might help them. Thus the price of property is increasing day by day which has lead to demand in property. Having said that, there is hardly any open plots in Mumbai left to acquire and hence these days the major concept is of Redevelopments. Which also helps the exisiting residents to move few steps ahead than their normal lifestyle and increases the worth of their property.

Also the property demand is attracting lots of other people from different location, cities and countries across the Globe. Due to such demands the optimistic RBI rules has planned to permit foreign banks into the country's secured banking environment. Constant housing need will be a big turn this year for the Indian economy and the real estate companies will definetly concentrate to fulfill this demand.

While if we look on the other side of the market, the real estate sector is loaded with high costs due to which there is small chance of decrease in property price at the micro level of real estate market "But" simultaneously the cost of Construction has also been gone upwards by 40% in couple of years along with increased government taxes and extras have also rised up significantly. This rules out the possibility for decrease in costs, regardless the weak market.

Banks have recently started avoiding to provide loand to real estate companies, this has resulted upturned price to the total cost.

The association of Real Estate Developers, confederation of India (CREDAI) has recognised demand from Tier-II and Tier-III cities as a motivation with an improved solutions for real estate. With increasing infrastructure developments in minor locations, towns and cities, backed by the bank loans, construction & property demand will rapidly grow here.

The recent decision to announce "Real Estate Investment Trust" (Reits), is the best decision for all. This is the great opportunity or Idea to bring the cash flow and keep it within the Indian economy. This also helps some investors to access profit producing real estate assets and should help both investors & developers, via improved investment & financing options. Offering tax bonus to REITs for investment in properties, particularly in the reasonable housing sector, should increase the chance for its success.

All the people has hundred percent knowledge that there is no better investment compared to buying properties and selling them with profitable returns. Even the gold rates fluctuates but property rates are rarely decreasing due to the high demand & competition of buying properties continously one after the other as per the buyers convenience.

The study says, maximum property is occupied by investors who purchases the property much before the other people can think of and sells at a very good price once that particular property starts receiving demand, this happens in a very short period of time. Competing to them are the genuine buyers now, who are moving from different states and cities to reside permanently overhere. Thus decreasing the chance for property rates to go down.