An Overview of the Indian Real Estate Sector

By: Propertiesmls

Currently, high appreciation rates being witnessed by India's property market are in large part due to interest rates reduction instituted after 2001 by the NDA Government.

With home loan rates sinking to a record low of 7.5% early in 2004, the way was paved for property rates in many Indian cities to reach an alarming high.
Before then, actually buying property was an option only for the very rich and the very famous. However, the very amenable borrowing rates encouraged even salaried individuals to go running to the banks singing 'All I want is a room somewhere' as they availed of home loans to buy a room with a view.

All this, led post 2003 to witness a huge demand for quality real estate across the country. And since, March 2005, Indian real estate prices have displayed an unstoppable upward curve, directly related to the opening up of FDI in real estate. As well, the heightened NRI interest in Indian real estate is also responsible for the market expanding at an unbelievable 100%+ rate.

This has led many to believe the Indian real estate market is a bubble that will eventually burst, as residential rates in many Indian cities today, such as, Mumbai and Delhi are on par with property rates in the West. However, taking an investor's point of view on this phenomenon:

Repeatedly, behavioural finance has proved, whenever asset prices begin to escalate, it is always initially interpreted as a 'bubble'. An in-depth analysis of real estate price appreciation and the reasons for it, help understand the fear, the bubble will burst. What one must comprehend and understand is that real estate price appreciation is backed by the following fundamentals:

1. A strong Indian economy has seen income levels rise, which has resulted in an increased demand for quality constructions, as well as, aspirations of bettering one's residential locations. Nuclear families and double-income households have also contributed to the explosion of Indian real estate prices.

2. Continuing to be a major revenue driver, IT / ITeS sector and rising outsourcing trends have driven up demand for premium office space.

3. A strong economy has also seen to it that the hospitality industry is operating on more than 85% occupancy in major metros, while rising business activity has resulted in increased investment in hospitality.

4. While, the organised retail industry is in its infancy and huge investments from major corporates are seeing an increased demand for real estate. And, location fixation has meant an increased appetite area-specific shopping complexes development.

Land being a scarce resource, property prices follow basic economics of demand-supply and pricing, which has lead to an incredible increase in property prices.
Normally, real estate returns are in line with inflation and if we look at the current price rise, returns delivered by real estate barely seem to compensate a long-term investor against inflation during the investment term.

So, it is wrong to presume that the Indian real estate bubble will burst. There is still scope for upward price growth, in large part boosted by an every growing economy, increasing number of nuclear families fostered by double-incomes, an IT / ITeS outsourcing trend that is adding other industry sectors to its growing list, increasing demand from the retail sector in the shape of ritzy malls, multiplexes, a booming hospitality and aviation industry, etc. As long as the Indian economy continues to thrive, so too will the Indian real estate sector. A bubble that refuses to burst!

For more information on Real Estate Agents, MLS visit

Source:

India Properties
 • 
 • 
 • 
 • 
 • 
 • 
 • 
 • 
 • 
 • 
 • 
 • 
 • 
 • 
 • 
 • 
 • 
 • 
 • 

» More on India Properties
 



Share this article :
Click to see more related articles