Real Estate- A Hot Sector but now reality isy something different!!!

It is the hottest sector in India Today. It is the melting pot of activity impacting several other businesses in the economy. Billions of dollars are pouring into the sector. Due to such large investment it is now focus of all the regulations in the country. Also, it impacts the common’s man living standard. We all know that for the last 3 or 4 years the property prices have shot up by 150-200 percent in all metros and other important parts of our country.

A recent study says that in India the Real estate market will expand from $16 billion to $0 billion by 2010.With so much expansion the overseas investors are pumping large amount of India in this sector. But today things are changing not whole but a bit. Although India’s strong economic growth will continue to drive demand for commercial real estate but due to oversupply of commercial space the trend is changing these days.

Because of large number of projects going on in real estate sector and side by side government increase interest rates for Home Loans the game is changing its trend. Specially for small players who only dependent upon investors and actual purchasers for their project but due to increase interest rates common man start waiting for right time when interest rates going to reduce and investors are also not interested in investing money in this business because as per study the value of property will decline by15-20 percent in near future.

I will tell you by giving real example, around Chandigarh lot of developers are coming up because everyone knows that IT industry targets Chandigarh so there is huge amount of requirement of flats in 2-3 years. Developers who are renowned and have money with them start their projects already and customers also show interest in them but for small players the game which was in their favor last year now go against them because they are not getting customers and investors for their projects because of falling in property rates and increase in interest rates for home loans.

The Impact of economic forces on demand and supply of real estate

Economic Growth Increases:

Annual GDP growth rate of 8-9 percent forecast.
Highest growth rate is in the service sector which has highest demand for commercial real estate.

Inflation Decreases

Though lower than the February levels, it continues to remain a major concern.
It is why the government has cut liquidity, tightened credit supply and raised interest rates.

Money Supply decreases

Liquidity seen as a key factor in inflation and overheating of real estate sector.
Restricted availability of funds to reduce options with developers/builders.

Interest Rates Decreases

Higher interest rate result I higher borrowing costs.
Developers are exploring other options while home loan borrowers are revaluating options.
Investors redefine their expected returns from the sector.

Being a Civil Engineer and having a family business of real estate I have lot of interest in this sector so as Prabal started this new blog I decided to put something on that.

Hopefully everyone should contribute in this blog because I think it help us in enhancing our knowledge in different sectors .