What is the current scene of buying property in India. In my hometown (second tier city) I have seen property prices shoot up by as high as 20% CAGR in the last two years. I expected the price to come down with weak global markets and layoffs in metro cities but the stickiness is still there. Is this also the scene in Tier 1 cities? And why is the rate so much higher than the 5-6% these finfluencers and investment gurus keep saying? Is there any possibility of a downturn in prices?
RE is largely a micromarket economic decision based on whats happening in the immediate 1/3/5 km radius and then the overall economic momentum of the town/city.
eg.
Momentum in Noida with the completion of the Jewar airport,
Towns benefitting from easy access because of the Delhi-Mumbai Expressway.
Businesses moving out to BKC from SoBo.
Hence, experiences & returns vary wildly.
An aggregate input on a forum like this will tell you nothing. Assess your options hyper-locally.
I understand the hyper-locally part but RE being such a huge market definitely should also have some macro economic effects, indicators and causes as well right? I don't see a problem with public infra projects coming up that raise the price of a particular part, but can we justify the same for prices in a place like outer areas of Bengaluru?
Macros are not the right lens for any investments (even equities). To get massive yield on investments, go micro.
There has never been a single macro reason for RE returns. The only tenuous correlation (and not causation) is a low interest rate regime, but even that is weak.
Bangalore is a flawed example - driven by unbridled growth and a big lag in housing supply.
If you're talking about agricultural or just pure land then in India it doesn't really follow the capital markets cuz infra development is government led and this one is spending a lot. So if you see highways etc come up you can see obnoxious rises in property. Residential real estate that's organized or say built by developers also won't see a short term slow down as these projects were started when interest rates were low so developers are well capitalised. In the long run inflation will catchup and eat into their margins.
Commerical real estate will definitely slow down cuz inflation in cost and restructuring of debt
This makes sense, just as a follow up, what do you think would be the timeline of property price growth slowing due to the effects of current high interest regimes? Will this affect residential and agricultural RE as well?
I think it will when the government will slow infra building and it's also very localised so depends on the local state government as well. But i think they won't slow anything till 2024 elections for sure so you can maybe expect closer to 2025 when inflation globally is under control. But Indians always view agricultural land etc as a store of value so rates won't fall but just won't grow as much. I'd recommend not trying to time the market and if you see a developing area buy agricultural land. There's a lot of tax and subsidy benefits as well. I got 40% of my money in land
Property prices would never come down in Indian cities as real estate is controlled by powerful politicians, and they can endure any bear markets. Example DKShi in Bangalore (through Shobha builders) and Stalin in Chennai ( through GSquare). Protip : Do NOT invest in RE if you're not going to live in it. It has too much maintenance costs, unnecessary hassles , not to mention some goons might encroach your property (if it's a plot). Also, if there's an emergency and you need to sell your fancy home, it's not easy to find a buyer in a short notice. If you account for all these, index funds would truly be a far better option!!
Fair, instead of finfluencers, you can check RBI real estate index data
https://m.rbi.org.in//scripts/BS_PressReleaseDisplay.aspx?prid=54293
2 years bull run of RE never means it will continue growing at same pace. In last 2-3 years, NIFTY50 went from 7500+ to 20000+, do you wanna do CAGR story?
Thanks for this, I agree with my timeframe issue but in my defence I only have data from when I am noticing the housing market of my hometown. Also, is the data of hpi based on actual market survey (including black market pricing) or not? Cause the official minimum price of land in my area is less than 50% of the trading price of houses. But it is not revealed on paper so as to avoid taxes on property trade and registration fees.
Always meet the seller/buyer before entering into an agreement.. nowadays middleman bump up the prices exorbitantly and leave peanuts for buyer and seller.
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