In a recent report on house prices in major cities across the country, real estate consultancy PropTiger.com found that average residential property prices are set to rise by 7% by 2022. Prices have increased by 8 in Pune. % By 2021, consultants rightly attribute rising prices to rising construction costs and a steady wave of demand that began after the outbreak and has been strengthening ever since.
It is remarkable that house prices are rising this way after years of slow or neutral growth. This means one thing to different people – those who have already sold their home are grateful for the timed process. Nearby residents think the heat is on – time is running out to postpone this decision.
House prices rise due to a combination of factors such as inflation, supply and demand dynamics and the overall state of the economy.
Inflation is a big factor in rising home prices, but what exactly? In short, inflation is an overall increase in prices and a decline in the value or purchasing power of money over time. As inflation increases, the value of money falls, forcing people to spend more money to buy such goods and services.
As with everything, building materials, labor and other costs associated with construction add up to costs. With housing coming onto the market slowly, developers want to protect their clients as much as possible from this increased cost, otherwise demand may fall. However, they can only do this for so long – even if demand for housing is healthy, there’s no reason homebuyers shouldn’t pass up higher prices.
Demand and supply
At the same time, supply and demand dynamics contribute to the increase in house prices. When demand for housing is high, prices go up. This can be due to several factors. For example, if there is an increase in population or an influx of people to an area, the demand for housing in that area will be high, but the supply of housing may not be sufficient. On a more nuanced level, a project by a reputable manufacturer may sell well, resulting in more demand than supply. This results in higher prices for available assets.
There is another angle to the demand-supply argument – that is, if interest rates are attractively low and it is easy for people to get home loans, more people can buy houses, demand increases and prices rise. The interesting thing is that the interest rates on home loans are increasing in India, but this has not caused any significant reduction in the demand for houses.
Indians are still clamoring to buy real estate because they know property prices rise faster than interest rates. Buying a home is one of the most important decisions for most families in India. They will wait for a while and see if prices or interest rates come down. Activates the tendency to buy a home instead of watching them go up.
State Of The Economy
The state of the overall economy can also affect housing prices. When the economy is strong and people have more money and job security, they are more likely to buy homes, driving up demand and driving up prices. On the other hand, when the economy is weak and people are struggling to meet their needs, they may delay buying a home or choose to rent instead, resulting in less demand and a shortage of housing Can put downward pressure on prices.
Economic conditions do not affect all categories of homebuyers equally. In the Indian context, we find that luxury home buyers coming from existing properties are less affected by overall financial performance and less affected by interest rate increases. Middle-class buyers are affected, but as mentioned, housing decisions are based on how well the economy is doing.
But there is no doubt that many low-income Indians, who normally can afford affordable housing, will be forced to put their plans on hold until the economy improves and job opportunities improve. Either that, or the government doesn’t offer special incentives specifically to own their homes. On the other hand, government policies such as tax incentives or subsidies for affordable homebuyers can increase demand and push up prices.
Although home prices tend to increase over time, the rate of increase can vary widely. For example, housing prices may remain volatile in certain areas or decline over time due to declining population or weak local economies.
With all the activities happening in the Indian housing market now, the idea of owning an Indian home is now creating pressure. Will house prices ultimately never be? Even if interest rates fall over time, home prices will not follow suit because demand is high and prices are recovering after years of stability. There may not be as much time to get off the fence as there is today.