Real estate has become India's
favorite investment destination thanks to the sky rocketing rise in prices of
property. In the last twenty years, property valuations have risen almost 15
times, on an average. With massive migration from the rural to urban and semi
urban areas, the real estate has seen massive demand. However while for the
past few years everyone thought that all was rosy for the construction sector,
the recession set in and this has had a massive impact on the fortunes of the
real estate sector.
The Indian real estate industry
was heavily regulated by central, state and local laws, which ensured that most
developers were wary of growth. However with the advent of liberalization and
rising disposable incomes, Indian has bought houses by the millions.
The major trends in the real estate industry in India are
1) Move from horizontal to vertical: while rural India prefers to
live in single or double storey structures, the urban landscape is dotted with
buildings that are routinely 10 floors or higher. While some people derisively
term cities as concrete jungles, these high rises ensure that land is used
sparingly for housing. Every city in India has its own set of High rises which
are standard bearers of that particular city. Malls and promenades have started
to become popular in the smaller towns and villages.
2) Urban areas preferred: most of the real estate property is being
developed in urban areas and that has led to a massive oversupply of housing.
With agriculture not being seen as a lucrative career, massive migration from
rural to urban areas has ensured that most major cities are overcrowded and
housing here is priced at a premium.
3) Suburbs are preferred over Central city areas. With most of the
real estate buying coming from young people, especially newly married couples,
there is a distinct preference for a house in the suburbs which costs lesser
but also has all the requisite facilities. The central areas of most major
cities are overcrowded and have hugely expensive property rates. There is also
a marked preference for a newly constructed property as compared to second-hand
property.
4) Location, Location, Location. The location is the absolute main
determinant of the property's value. In Mumbai, a shanty near the pricey Colaba
causeway will have a valuation in crores, while as a larger flat in the
Northern suburb of Virar will cost lesser than the Colaba shanty. Even in the
suburbs, real estate that is closer to the main road or railway station/bus
stand tends to cost more. The access to transport is a crucial factor as most
people would like a house near a main source of transport.
5) Costs will only go up: Every one dreams of owning a house. While
property is one of the most difficult assets to liquidate, the lure of a good
profit without much effort has prompted many people to invest. Almost everyone
believes that property prices will never fall and that has fuelled a buying
spree among people. Most of the real estate industry is geared towards building
housing units. Some firms specialize in industrial and commercial property.
