It?s truly remarkable that real estate prices in India have almost doubled since the beginning of 2003 and are set to double once again over the next three to five years. Now it?s not just Tier 1 cities like Bombay, Delhi and Bangalore that are seeing rapid real estate price appreciation, but even Tier 2 cities like Pune, Thane, Nasik, Hyderabad, Jaipur and Chandigarh that are seeing property prices begin to climb. So what are the reasons for the property boom in India?

#Increase in demand for both commercial and residential real estate

#Low interest rates

#Tax benefits

#Rise in disposable income

#Growing middle class

In 1995, the average cost of a home was about 22 times the average annual salary. Now the average home costs about 4.7 times the annual salary of a homeowner. The interest rates on housing loans has decreased from 18% in 1995 to 8.5% at present. In 2000, less than 10% of people under 30 owned their own homes in India now almost 24% of people under the age of 30 own their own homes.

The increasing affluence of the Indian middle class and more liberal lending policies by banks have added to the increased demand for residential property. India is adding 100,000 people every day to its middle class, the fastest rate anywhere in the world. About 14 million college graduates are entering the Indian work-force every year. That?s astonishing to me at least.

With job opportunities expanding in big cities and urban areas, lifestyles and family values are also changing. No longer does the typical Indian household consist of large families with parents, grandparent and kids often under the same roof.

While demand for land has been increasing rapidly due to the above mentioned factors, the supply has not kept pace. A large percentage of land holdings do not have clear titles and is typically held by individuals and families which makes the organized dealing and transfer of titles cumbersome.

Property prices are expected to continue northwards especially in Tier 2 cities where the appreciation has been far more muted than in the Tier 1 cities.

I think my approach of acquiring residential property, leasing it out for a few years and then selling the properties should create a very exciting opportunity for price appreciation. Let me give you a quick personal example.

I bought a 2800 square feet apartment with 4 bedrooms and 4 baths one and a half years ago in Pune at a price of $42.25/square feet or total of $118k. I have leased that place out for approximately $2,100/month with the tenant paying all maintenance and utility charges.

At present the property is worth $60/square foot or $168,000. So, I have made almost 50% on my investment plus received about $36,000 in rent for the last 18 months. http://www.realacres.com

Posted by Peter Kulinski on December 13, 2008 at 12:00 AM

About Peter Kulinski
Peter Kulinski is affliated with Barker Realty, Inc., which is located in Santa Fe, NM. For further assistance please use the contact information located on the right.




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