by Mr.Anil Pharande
Real
estate investors buy property when they know that the property will gain in
capital appreciation. But, it is not only property investors who are attracted
by this phenomenon.
There
is also greater interest for buying property in Pune rather than for rental
properties, since real estate appreciation allows them to increase their
personal net worth.
What
causes property prices to rise in certain areas?
This
phenomenon - a key concept behind real
estate investment - is called appreciation, which is nothing but the
enhancement of a property’s market value over time.
Real
estate appreciation takes place because of various factors, including:
.jpg) |
| Mr.Anil Pharande |
The
supply and demand dynamics of a particular location
*
Inflationary pressures
* Home loan interest rates (cost of borrowing)
*
Arrival of new real estate market drivers in a location
*
Population growth
Demand And
Supply..
When
there is increasing demand for houses in a certain area, property prices go up
if the amount of residential real estate projects is not catching up fast
enough.
In
other words, self-use buyers are willing to pay more for a property because
they find living in that location desirable. This demand brings in real estate
investors, who buy up properties there to sell them at a profit when supply
slows down again.
This
causes the property prices in that location to rise even further.
The
time for self-use buyers to make their purchase is before investor activity
starts in earnest at locations with high appreciation potential.
Inflation..
Inflation is the result of an excessive amount
of money in circulation, and this over-abundance of money causes its value to
fall.
When
this happens, prices go up for a number of things - including the prices of
land, construction materials, labour, legal building permits & number of
other things.
However,
inflation alone can not cause the property prices in an area to rise if the
area itself has poor accessibility, lacks infrastructure or / is facing an
oversupply of real estate projects.
Township
properties in Pimpri Chinchwad are fully insulated from these negative aspects
because of the, superior road networks, infrastructure that is miles ahead of
that available within PMC limits, and strict development laws that prevent
oversupply.
Housing Loan Rates..
The
behaviour of housing loan interest rates also has a direct bearing on property
appreciation. When housing loan interest rates increase, the demand for
property slows down because fewer buyers can afford to shell out the extra money
required by the banks or housing Finance companies (HFCs).
By
the same coin, a sufficient decrease in housing loan interest rates increases
affordability & boosts demand for properties.
Real Estate Market Drivers..
Market
drivers can be defined as developments in an area that increase the value of
living there.
In
the case of Pune, township properties are now known to encompass many or all of
these factors, which can include:
The
establishment of a new workplace hub (such as an office complex).
A
shopping mall and / or entertainment complex
Zoning
regulations that do not permit excessive construction projects, thereby
increasing the overall ambience via more open spaces, greenery, etc. (The
Pimpri Chinchwad area of Pune is a perfect example of controlled development
via forward-looking zoning regulations)
Transportation
facilities that make the location more accessible via road, air or / rail
Infrastructure
projects that increase the quality of living in the area (such as dedicated
water and electricity supply, public gardens, etc.)
The
proximity of schools, colleges and healthcare facilities that reduce travelling
time to essential services.
Population
Growth..
Similarly, the population growth in area such
as PCMC naturally increases the demand for residential properties there, and
this translates directly into appreciation in real estate rates.
About
The Author:
Mr.
Anil Pharande is Vice President - CREDAI (Pune Metro) and Chairman of Pharande
Spaces, a leading construction and development firm that develops township
properties in the Pimpri-Chinchwad Municipal Corporation (PCMC) area of Pune.
For
Media Contact
Mr.
Jay Kalghatgi
Client
Interface - CopyConnect
Mobile:
93201 42248
No comments:
Post a Comment