Perceptive of Price Appreciation in Residential Property

For common people who wonder about the sudden rise in properties and think it is hard to understand the increase in property value in the real estate market, here are few reasons that are behind the real estate price appreciation. Property prices in the real estate market may rise or decrease due to various reasons that includes supply of resources and demand from the end-users, inflation, interest rates on loans, and real estate market drivers.

Demand and Supply: The demand for residential properties in certain area increases considering its location and proximity to all the basic necessities and water facilities, based on which the price of the property is decided as well. Builders depending on the location of the property also charge buyers as preferential location charge that is included in the property cost. In certain cases, though there is high demand in a locality due to limited supply of resources in the construction of the building and low availability of large parcel of land and in order meet the potential buyers’ requirement, the cost of the property is adjusted.

Inflation: Inflation means increase in general prices of goods and services and subsequently the fall or decrease in purchasing. This is also one of the reason, where the cost of the land, materials used in construction, labor cost, and legal fee included in the construction may all rise, which in turn will force the developers and builders to rise the property price, reducing the sales and demand from the buyers. This is a very tricky situation for the builders, where they either could not reduce the price of the property or complete their construction and sell the property.

Interest Rates on Home Loans: With the increase in demand for properties, many financial institutions and banks came into existence with attractive rate of interest to aid the potential buyers to buy their desired properties. But, with RBI revising its policies and amending interest rates has made the builders and developers to raise the price of the property accordingly. Looking to real estate trend, it seems that builders are coming up with projects that are affordable and helping potential buyers in obtaining loan.

Real Estate Market Drivers: The developing infrastructures and metro rail construction across the country is another factor driving the real estate market. As properties built around this location has more demand because of the easy commute to work places and center of the city, which also made the builders to raise the cost of the property.

But the trend in the real estate market is changing with major builders offering residential properties at affordable prices that in turn are increasing the demand from the end-users.