Nov 08, 2013, 05.22 PM IST
What causes property prices to rise in certain areas? This phenomenon -a key concept behind real estate investment – is called appreciation, which is nothing but the enhancement of a property’s market value over time.
Real estate investors buy property when they know that the property will gain in capital appreciation - but it is not only property investors who are attracted by this phenomenon.
There is also greater interest for buying property in Pune rather than for rental properties, since real estate appreciation allows them to increase their personal net worth.
In other words, self-use buyers are willing to pay more for a property because they find living in that location desirable. This demand brings in real estate investors, who buy up properties there to sell them at a profit when supply slows down again.
This causes the property prices in that location to rise even further. The time for self-use buyers to make their purchase is before investor activity starts in earnest at locations with high appreciation potential.
However, inflation alone cannot cause the property prices in an area to rise if the area itself has poor accessibility, lacks infrastructure or is facing an oversupply of real estate projects.
Township properties in Pimpri Chinchwad are fully insulated from these negative aspects because of the, superior road networks, infrastructure that is miles ahead of that available within PMC limits, and strict development laws that prevent oversupply.
Home Loan Rates: The behaviour of home loan interest rates also has a direct bearing on property appreciation. When home loan interest rates increase, the demand for property slows down because fewer buyers can afford to shell out the extra money required by the banks. By the same coin, a sufficient decrease in home loan interest rates increases affordability and boosts demand for properties.
Real Estate Market Drivers: Market drivers can be defined as developments in an area that increase the value of living there. In the case of Pune, township properties are now known to encompass many or all of these factors, which can include:
The author is the chairman of Pharande spaces.
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