Trends for Real Estate Projections
Falling Rupee: The falling rupee impacts real estate in two major ways. First, it makes homes and real estate desirable to NRI's or FDI companies because it is affordable. Urban areas and luxury homes can dramatically benefit from the exchange rate. Secondly, a falling rupee is associated with price inflation for assets and commodities. Housing, building supplies and transportation cost will increase in response to price inflation causing the overall cost of home to increase.
Rising Rents: There is a shadow demand in the real estate market. Rentals rise as more young people enter the market, people of age group 20-25 start finding jobs and they are looking for their own apartments. Bangalore has witnessed a remarkable increase of over 30% in rental transactions in 2012.
Rising Home Prices: Most builders take an average of 3 to 5 years to complete a project. The slow pace of new home construction is pushing prices up.
First Time Buyers: Most south cities like Bangalore, Chennai or Hyderabad have witnessed first time home buyers unlike in Mumbai or NCR which is an investors market. This could be one of the reasons for such high demand of properties in Bangalore .
Construction Costs: The last few years, raw material prices for construction have zoomed. Materials like Cement, Labor costs, Steel are at a high. The cost of Land has gone up too seeing the demand for homes.
Interest Rates: RBI has been working correcting the interest rates in one direction, UP. This is primarily due to inflation index. Even with such high interest rates of over 10%, the prices for homes haven't fallen. Western countries have an interest rate of 3-4%. Banks have been reluctant to make construction loans at lower rates, this builds pressure on builders to hike the home prices and pass it on to consumers. Most builders adopt a strategy on pre-launch pricing and works out well as most of them are able to liquidate at least 40% of home inventory.