Owning a house is India is getting more expensive by each day. It now seems that you have to shell out few lakhs extra for every six months delay in buying your home. In spite of sluggish economy over the last 6 years, high interest rate, over supply and many upcoming projects across the cities, the property prices have only gone up. Even though on paper and theoretically you will always read that the prices are stagnant or in some places there have also been price corrections. However, all that is hoax and in reality, when you go property hunting you realize that the prices have only risen. It seems that the property prices across India are immune to external market conditions, government policies and bearish market sentiments. Here are some of the prominent reasons as to why owning a home is getting more expensive –
Rising Inflation and high disposable income
The retail inflation in India has been in double digits in the last few years. The highly inflation has meant high salaries and this has led to more disposable income. Due to this people have taken risky bets on real estate and this has meant that the demand for properties – both commercial as well as residential continued even when the other sectors were battling for survival. Though the inflation has now subsided, the economy has substantially improved which means that the home prices will continue to rise.
Heavy Investments in real estate by investors
The real estate is one of the safest investments which give stable returns over a period of time. Due to this the investors across the segment including industrialists, sports person, film fraternity, high net individuals, etc. have invested heavily in properties. This has meant that the prices for end users continue to remain high. Additionally, the nonresident Indians have also been actively investing in real estate sector to take advantage of the currency depreciation and high returns. Though the investments by NRIs give the country the much needed foreign currency to bridge the current account deficit but it has meant that the common man’s dream of owning a home continues to remain a dream.
The ordeal of the common man is confirmed by the fact that the end user occupancy in residential segment in United States of America is more than 60% as compared to very low double digit occupancy in India. Hence the demand for home in India by end users is extremely high and comes only second to China. All of these factors have contributed to high home prices even though there has been huge supply in terms of new projects in Jaipur, Hyderabad, Bengaluru, Noida, Ghaziabad, Thane, etc. and almost every city.
RBI’s new definition of affordable housing
Few months back the Reserve Bank of India has said that the home loans of up to 50 lakhs for house valuing 65 lakhs can be defined as affordable housing. The RBI has also said that it will continue to review the definition of affordable housing from time to time. This definition of affordable housing by the Central Bank has come as a big boost for developers and has given them enough reasons to further increase the home prices.