The real estate market is dynamic and influenced by many factors. Property buyers must understand these factors and formulate their buying strategy. In the current situation when the sector is growing by leaps and bounds, property prices majorly affect buying behavior.

This blog discusses key factors affecting property prices in detail:

1. Demand and Supply

The basic principles of supply and demand dictate property prices. Prices tend to rise when the demand for property is high and the supply is low. On the other hand, when supply exceeds demand, property prices fall. The economy also plays a crucial role in determining demand, supply, and property prices. When the economy is doing well, buyers have high purchasing power resulting in greater demand. The demand falls during a slowdown as the availability of funds is restricted. This was seen during the lockdown when the real estate prices were not increasing or falling in some locations.

2. Economy

Real estate prices are dependent on macroeconomic factors and GDP growth rate. A growing economy with good business activity and high employment rates boosts real estate prices and the general sentiment in the market. This can cause the prices to rise. On the other hand, the growth rate of prices is slowed down or stagnant during an economic slowdown. When the economy grows, the employment rate is high, setting a positive trend for residential real estate.

3. Interest Rates

The monetary policies of the Reserve Bank affect the home loan interest rate as most home buyers and investors buy property on loan. When the rates are low, the demand for loans increases driving the property prices up. When the demand is low the prices remain stagnant or fall. Inflation is another reason for the rise in property prices. Investors use real estate as a hedge for their investments causing property prices to rise.

4. Infrastructure Development

We currently witness large-scale infrastructure development in most cities in India. All the major cities have almost completed metro projects connecting all the major hubs of cities and their outskirts. It is observed that the property prices increase in locations that the metro line covers. The government’s initiative like the “Smart City Mission” has undertaken infrastructure development of 100 cities to improve the life of the citizens. These initiatives also impact property prices as citizens will enjoy a better quality of life empowered by sustainability and technology. The development of airports, roads, and business parks causes property appreciation commanding higher prices.

Real estate property prices are influenced by a complex set of parameters that depend on each other. The emerging pricing trend is a product of the combined effects of all the parameters explained above.