Indian Real Estate industry remains a dynamic environment and undergoes changes throughout the year. Because of the ever changing nature of this industry, to arrive at an evaluation of a certain location or city in terms of the investment potential held by it can be a daunting task. Some factors to consider when making an investment decision:
- Pricing Trends: Tracking the price movements of real estate in a certain area can be useful while making a decision to invest. To evaluate the growth witnessed in the particular area it is helpful to gather information on pricing trends and compare it with the trends in the past, say over a period of three years. Studying past trends helps in arriving at a reliable estimate for the future.
- Growth Factors: After identifying the real estate investment opportunities at hand and studying the pricing trends, the next step is to identify and understand the factors which have influenced pricing changes within the market. Property value grows on the back of both macro and micro-economic factors that influence the development and expansion of the market.
Market growth is induced by addition of civic and social infrastructure in the form of roads, bridges, public transport, schools and colleges, hospitals and other public services. Apart from these, factors affecting the state and local economies such as regional regulatory guidelines, tax reforms and interest rates also play major roles in either propelling or subduing market growth.
- Buying Activity: Establish whether a certain locality is a buyer’s or seller’s market by assessing the buying and selling activity in the area. This can be done by finding out how long the properties listed by developers or owners remain on the market.
This trend is called ‘Days on Market’ and can be studied over a period of two or three months based on online property listings. It can be done for several locations simultaneously and is a reliable method for researching existing supply and demand. A fairly accurate estimate can be made about future buying trends in those areas.
- Central Locations and Suburbs or Outskirts: It is a good idea to extend the field of research to suburbs or even further outskirts of the area being analysed. It is common for growth to stagnate in central locations as they exhaust the growing capacity with new developments. This automatically translates into faster growth of the adjoining locations which still have a capacity for development, both in terms of real estate projects and infrastructure.
These are some of the time-tested and proven fundaments of successful residential real estate investment. While market dynamics certainly change all the time, the rules that govern returns on investment do not. Real estate investments can become very profitable if the markets are studied in a structured and method-driven manner.