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A boon to realty?
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The slump in the stock market makes many investors turn to real estate, says K. Sukumaran
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These are days when mixed signals come from different 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 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
Minor reverse trends
Some reverse trends in demand for houses/apartments began when the interest on home loans travelled north in the wake of the Reserve Bank’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.
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.
Cornering of large areas of rural and peripheral land by speculators created artificial shortage of land and prices skyrocketed. Acquisition of land by governmental agencies for large-scale infrastructural development and interference of courts also led to the price spiral.
Infrastructural development companies got a shot in the arm when FDIs were allowed in real estate. These companies played in the stock market too. Many companies came in with IPOs and mopped up crores of rupees from the public.
Real estate investment trusts are also in the offing to give opportunities for the small investors.
Bolt from the blue
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 different 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.
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Property Plus
Bangalore
Chennai
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Thiruvananthapuram
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