A to Z of Real Estate APPRECIATION..!
by Sukriti Yaduwanshi, Magicbricks Bureau
Many factors influence the enhancement of a
property's market value over time
The Indian real estate market and its growth is
de pendent on various factors. Investing in the real estate market can reward you
with good returns if the factors that affect the value of the property are in
your favour.
Now the question is, what causes property value
appreciation.
Appreciation is a concept in real estate that
defines the increase in property value because of certain factors that
influence its rate.
Real estate appreciation takes place because of
factors like economic trends, household finances and consumer confi dence,
which are major drivers for the appraisal in the property value.
FACTORS CAUSING APPRECIATION..!
1. Population growth..!
The value of property increases when there are a
huge number of consumers in the market.
The population growth increases the demand for
residential properties and this translates directly into appreciation in real
estate rates.
The increase in demand tends to increase in the
value of any property, as it compels consumers to buy.
2. Inflation..!
Inflation is caused due to an excessive amount of
money in circulation, which causes money value to fall. This leads to increase
in land prices, construction materials, labour, legal building permits and a
number of other things.
This gives the builder a chance to cull out the
invested value in a property, which is built or is under construction.
Another aspect of inflation can be positive for
investors. Home buyers who invest in real estate can get good returns at the
time of inflation.
“There is direct correlation between inflation,
demand and price appreciation. In the economic dynamics, each of them plays
their role for a price appreciation of the property. If there is increasing
demand for homes in a certain area, property prices go up.Once demand generates
it brings the investors, who buy properties in the area to sell them at a
profit when supply slows down again. This causes property prices in that
location to rise even further. Among other factors, inflation could result in a
rise in the price of property as the cost of a number of things including the
prices of land, construction materials, labour and legal building permits, go
up. Thus, inflation and demand for a property plays a significant role to
determine the price appreciation,“ says Aman Agarwal, governing council
member, NAREDCO and director, KV Developers. Infrastructure:
The social and physical infrastructure is a major
growth for the real estate market. Changes in the infrastructure in and around
the property add an established liveability quotient for the consumers. Market
drivers can be defined as developments in an area that increases the value of
living there.
Factors like new workspace, shopping malls,
flyovers, schools and hospitals etc. all contribute in the
appreciation.Projects that interlink localities to the neighbourhood areas also
influence the price of the property.The better the infrastructure, greater will
be the value.
3. Demand & Supply..!
The demand and supply is influential of human
behavior. Home buyers prefer locations which are sound in terms of
infrastructure.Sometimes consumers are willing to pay more for a property
because they find living in that location desirable.
This demand again brings in the real estate
investors, who buy properties to sell them at a profitable rate when supply
slows down. This causes the property prices in that location to rise even
further.
The time for endusers to make their purchase is
before the investor activity starts in earnest at locations with high
appreciation potential.
4. Changes in nearby properties..!
Any changes in nearby localities can lead to
changes in the property prices also. This factor is associated with
infrastructure development and the population growth. Housing units, which are
in prime desirable locations, are the ones with high prices.
Any kind of growth and development can shift the
demand and supply graph of a locality. The more it is in demand, higher will be
the value.
5. THE EFFECT OF SMART CITY PLANNING
“The growth of a Smart City can give way to
opportunities, particularly from the real estate perspective.These cities are
considered a good bet for investors and buyers who are fetching their money for
a longer run. At present, prices in these cities are reasonable. The potential
for price appreciation is high with the implementation of the smart solution in
the next couple of years,“ adds Mr. Agrawal.
Market study is the primary activity that
requires attention before you decide the property value
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