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Stock market slump, a boon to realty?
These are days when mixed signals come from market sources, confusing the investor. While this may be true in the case of the stock market at the moment, it is not so in the case of the property market.The real estate sector in India has been witnessing an almost unhindered upward demand graph. Though many reasons can be attributed to this trend, some prominent reasons have been:
• Increased urbanisation followed by demand for both office and residential accommodation.
• Upward trend in employment potential, especially in the IT sector, leading to higher purchasing power with the salaried class.
•Easy and speedy dispensation of loans from commercial banks and other financial institutions.
• Promotion of high quality living by builders and promoters.
• Projected increase in property cost.
• Better return from investment in real estate.
• Tax sops
Some reverse trends in demand for houses/apartments began, in a limited way, when the interest on home loans travelled north in the wake of the Reserve Bank of India’s dear money policy to contain inflation. There was also a jump in property prices in the metros and second-rung cities when large-scale development of housing colonies began suddenly.
Increase in the cost of construction materials dampened the spirit of middle income groups. Introduction of service tax on developers, indiscriminate revision in guidance value of land for levying stamp duty and registration charges also had its effect on the prices. The slowdown in the IT sector and the dwindling dollar value contributed to the cooling off.
The sudden about turn in the stock market from the middle of January 2008 has created fresh opportunities for real estate. Many small and medium investors burnt their fingers following the slump in the stock exchange index. They have to now plan their investments in various instruments and securities. One option will be to think of diverting a good percentage of investments to land and buildings, where the volatility is less. The middle income group will go in for small and medium property with prices ranging from Rs. 25 lakh to Rs. 50 lakh. It may even think of one-room “studios” in the metros or invest in small towns.
K. SUKUMARAN
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