SIX reasons why property prices WILL NOT fall in your city!
Siddhesh Joglekar, founder of Estatelister.com lists out reasons why there is little chance of property prices falling in your city.
The Indian Economic Growth has been caught in the global headwinds that emerged from the sovereign debt crisis in the European Union and from the sluggish pace of Economic Growth in the US. With GDP growth in the western world taking a beating, the pace of increase in Indian GDP has also gone down significantly.
In the backdrop of such an economic environment, many investors in Indian Real Estate are now waiting for an apparently long impending correction to take place in property prices around the country.
However, surprisingly enough, the best that they have witnessed till date is price stagnation, or in some cases, a marginal increase in property prices over the past one year.
And we tend to agree. Property prices across the country are unlikely to see significant price corrections of more than 10 per cent in the coming few years.
In this article, we try to decode some of the factors that are working to keep up property prices at such elevated levels.
Photographs: Rediff Archives
1. Black Money
2. Loan Demand
4. Mahatma Gandhi National Rural Employment Guarantee Act
Finally, if we consider real estate investment to be a risky investment (next only to equity investments), in times like these, a rational investor would expect to get significant risk premiums for any investment that they make in the sector.
Considering that a Fixed Deposit can yield up to 10 per cent per annum (risk-free), it should not be unreasonable to demand an 8 per cent premium over the risk free rate of return. What this translates into is a scenario where real estate prices double every four years.
Siddhesh Joglekar runs estatelister.com