AREA WISE DEMAND AND SUPPLY
It is quite possible that a particular area has all the necessities of good infrastructure , access to markets and entertainment means but if it is loaded with existing and upcoming projects, the price rise in that area may not be dramatic, but a gradual one. One may make an estimate of number of available and proposed flats in an area through good brokers and ascertain the price movement in shorter term. Developers offering free stamp duty and registration or any other goodies along with the flat purchase are suggestive of excess supply in that area.
BUILDER AND THE BUILDING
Once you decide upon the locality and area the argument can be extended to which builder to choose there. Be careful about the builder's track record, his financial strength, his ability to deliver on time, construction quality and the payment terms, all of this especially in case of a local builder.
Full cheque payment is always preferred which not only ensures fairness and transparency on the builder's part but also a decent white collared neighborhood. This is one of the most ignored facts that is always in our control, at least in a primary transaction . These aspects shall indeed give you that comforting feeling that probably you are paying a fair value, if not the best price.
After considering all the above, your negotiating ability (not good communication skills) is crucial , which means leveraging the available information and a fair understanding of the points discussed. In a seller's market projecting oneself knowledgeable can put you in a stronger position and get the price you want.
Remember that when the upward price momentum prevails, it is generally expected to remain like that as long as there are buyers who are ready to pay that price! Yes, markets do determine the prices but every product has its own intrinsic value – identify it and pay accordingly. Go ahead and be that different customer!
Hope all of this sounds practical if you are an end user but if you are an investor then one requires doing a deeper analysis beyond these macro factors.
The returns on property investment in next year or two are unlikely to be the same as they were in the 1st or the 2nd phase unless , your investment has a very promising future. Because when markets fall or correct , the impact is proportionate and only properties with good intrinsic value can withstand the fall, retain value and recover faster.`
Fear of excessive investment flows driving buyers away
What is worrisome at this point is the fear of excessive investment flows and the speculative element in prices which is driving the genuine buyer away from the market. This is likely to result in a drop in resale transactions and eventual drop in yields.
A time horizon of 3 to 5 years is desirable at this point for better capital appreciation while rental yields could be good depending on the area as people might prefer to rent now than buy. Rising interest rates is another factor which might curtail the buying momentum.
Real estate price movements are unlike share price movements since there is a lead lag effect in case of the former. Stock prices tend to gyrate in shorter periods as they are influenced by various factors while real estate prices generally maintain one direction in relatively longer time periods.
With the sharp rise over the last one year, prices have crossed earlier peaks in some cases and it is quite likely that the higher prices will need to settle down for some time leading to stagnation. Simple economics tells us that rising prices always result in slowing demand. That does not mean they will fall from here and hence the above discussed points become even more critical.
Further price appreciation expected
The next big push to the residential market may occur when the commercial property market also revives. So far there are mixed signals of any pick up in the commercial property market due to an over supply situation but it is said that every 1sqft of commercial property feeds in to an additional demand of 6sqft of residential property .
And if this is to be believed, one might see further price appreciation a year down the line when commercial property prices also rise but maybe not now.
I guess that answers the big question. One must understand that any physical asset like real estate will always retain its inherent value over a long term whether it is a flat, bungalow or a piece of land.
This basic principle itself is strong enough for this asset class to score over any other asset class in paper form
Source: Economic Times
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