Real estate market lures a number of potential buyers and is usually considered a safe bet by the investors. As a matter of fact, this sector too has its highs and lows just like any other market. For instance, there was a boom in the realty sector from 1988-1994. On the other hand, the market was stagnant during the year 2002. Pawan Kumar Dhoot, M.D. Dhoot Group, one of the leading realty entities highlights that it is imperative for the investors to consider certain factors before investing in this sector.
At present, the number of people buying residential properties has decreased drastically. The increase in the property prices compared to the average income of individuals is one of the major reasons for this. Thus, there arises a dire need to induce the concept of affordability in the real estate prices.
The level of demand is also determined by Rental yield (the amount of rent paid per annum over the cost of buying a property). People prefer buying their own home over living in a rented property if the rent is higher than the EMI to be paid for purchasing a property. There is a direct relationship between rental yields and the level of demand. In other words, the demand tends to increase if the rental yields are high.
According to Pawan Kumar Dhoot, Managing Director of Dhoot Group, the real estate market is a speculative market and thus moves in cycles. Talking about the present state of the market, he anticipated that the current correction phase will last for a few more years. The stagnancy in the realty sector has resulted in a number of unsold inventories. There has also been an increase in the cost of construction over the past few years. The increase in cost during diminishing demand has pressurized the developers to lower down their prices.
In such critical situations, it becomes important for the investors to undergo a comprehensive study of the market in order to ensure great returns and make the best use of their resources.