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Published On: Sat, Jul 11th, 2015

Who’s to Blame for Rise in Realty Prices?

Truly speaking, there is no one directly responsible for the rise in the prices of real estate assets over the years. There are macro as well as local conditions that govern the demand and value of property. There are zones within territories where the sales have stalled completely while properties in certain areas are selling like hot cakes. The case in point is that of Gurgaon. The city was among the ones which was hardest hit in terms of residential sales. There were areas where inventory kept piling up while there were others where the new property development remained high in demand.

Then there is the case of real estate in Bangalore which almost never ceased to function. Even through the recession, the property market of Bangalore kept ticking and the registers kept ringing. Despite the slowdown, there was a high demand as well as sales in residential property in the city.

photo Alina Ku-Ku via Shutterstock

photo Alina Ku-Ku via Shutterstock

In both the cases, the property values kept appreciating; however their values were far higher in case of Bangalore owing to the demand. The city presented itself as a fertile ground for property development and witnessed the largest number of new project launches by the end of 2014. This high demand was not only for 2 BHK and 1BHK in Bangalore. It was also for independent homes as well as villas the demand of which emerged over time. The builders had approached the expat community which was also ready to invest in property in Bangalore. This made the city quite popular and valuable. The same trends were also seen in Pune, Mumbai and Chennai.

The impact of the recession

The recession also had a major role to play in the rise of prices of all materials sold in the country. This is a characteristic of rising inflation. India is a developing country and according to the theory of economics (which has been proven time and again), the rise in prices of commodities is a by-product of inflation. The inflation in turn is a by product of development. Whenever there is scope of development, the economic activity remains high and works towards achieving the higher GDP goals. In doing so, the industries invest capital by borrowing. Suddenly there is a rise in the amount of currency in the economy and that depreciates its value against other international currencies. This in turn increases the cost of amenities within that nation. That is what has been happening in India overtime.

However in case of the economic crisis, the industrial output was lesser and hence revenues were down. However the capital investment continued for the first few years since the recession hit the market. The price of properties was growing but the rising recession kept pushing them higher. The interest rates were increased by the banks to curtail the inflation which in turn negated the industrial growth. The prevailing government was not able to create a positive growth environment due to policy paralysis and that impacted all markets including the property sector.

To conclude-the revival of property businesses

Now that there is a positive growth of the real estate business, the demand for 2BHK flat for sale in Bangalore and other territories has remained high. So has the demand for other new properties.

Guest Author: Rajveer Das

 

About the Author

- Outside contributors to the Dispatch are always welcome to offer their unique voices, contradictory opinions or presentation of information not included on the site.

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  1. Sandeep Sharma says:

    Marvelous article! I need individuals to know exactly how great this data is in your article.

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