Real estate is a tangible asset that has been a preferred investment choice for generations. It has been known to provide stability, and security, with the added benefit of long-term capital growth. However, in the last three years, there has been an uptick in real estate prices. This growth has affected the profitability and viability of builders and developers negatively.
Although, price growth is a natural phenomenon in the real estate industry. However, citing the economic disruption caused by the pandemic and the current geopolitical situation. The housing developers are finding a hard time getting potential clients for their completed projects. In this article, we will look at the factors contributing to the price growth in real estate along with the strategies to mitigate the same.
Factors Contributing to Price Appreciation in Real Estate
Several factors contribute to the price growth of real estate. Let us explore some of these factors in the section below:
1. Policy Changes: Policy changes impact the real estate market heavily leading to an increase in property rates. Incentives like tax breaks and subsidies introduced by the government drive up demand for real estate investment. Similarly, GST rates, high-priced raw materials etc lead to a rise in property prices by builders and developers
2. Economic Growth: Economic growth is another significant factor that contributes to real estate price growth. When the economy is strong, people have more disposable income. Thus, they are more likely to invest in projects by housing developers. This increased demand causes the prices to rise in real estate
3. Location: The location of a property is a crucial factor that determines its value. Properties that are located in desirable areas, such as close to the city centre are tend to show a positive curve on the price graph. Hence, housing developers show a keen interest in the plots with high growth potential
4. Latest Amenities: Amenities play a significant role in appreciating the value of the property. Properties that are situated near highways, have well designed interiors, patios etc are supposed to attract customers. Pertaining to its benefits, the builders and developers introducing amenities like recreational spaces, smart home technology to make the property desirable
5. Interest Rates: Interest rates on mortgages and other loans also have a significant impact on real estate prices. When interest rates are low, it becomes more affordable for people to invest in real estate. This is also profitable for builders and developers this increases the buying potential of the customer
Strategies to Manage Price Growth in Real Estate
Several strategies can be employed to manage price growth in real estate. One approach is to encourage builders and developers to increase the supply of housing in the market. This can help to mitigate price increases by providing more options for buyers.
Investing in areas with high growth potential also helps to curb the growing prices. Housing developers have to identify the areas and then invest strategically to gain profit in the long run.
Staying informed about market trends and economic indicators is also a great way to keep price growth in check.
Finally, flexibility is something that never goes wrong in a dynamic industry like real estate. Builders and developers have to work closely with the government to adjust prices. Meanwhile, changing marketing strategies as per the property type is also pivotal to attracting potential customers.
Concluding, real estate price growth is a complex and multifaceted phenomenon that has significant implications for the industry. Although, it poses challenges for buyers and housing developers alike. Nevertheless, it also showcases opportunities for growth and innovation. On a closing note, to manage price growth the builders and developers need to stay informed about market trends and employ strategic approaches.