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Domestic trends

Domestic trendsDomestic trendsDomestic trends

Given the trend of rising property prices over the last few years, the price of the property you have shortlisted will most likely keep going up as you wait.

Residential real estate has one asset class whose prices have been steadily rising in most markets. Though analysts have been saying the residential property market in locations such as the Delhi-National Capital Region and Mumbai is ripe for a price correction, developers have been able to hold on to prices even as buyers wait for a fall. Given the demand-supply imbalance, the trend is likely to continue and your investment will in all possibility stand you in good stead even when other assets take a beating.

Data for the past few years show that real estate has been a rewarding asset class. For example, in 2011, one of the worst years for equities when the Sensex fell nearly 25%, prices of homes in most Indian cities remained firm despite the overall economic uncertainty, both in global and domestic markets.

During the year, prices in nine out of 15 cities covered by the National Housing Bank's residential index, called Residex (see chart), rose, except in Ahmedabad, where prices remained flat. In comparison, if you had invested in real estate stocks, the value of your investment would have fallen by nearly 50% between December 2010 and December 2011.

Even if one considers the period from end-2008 till March 2012, which saw a widespread slump in equity and property markets worldwide due to the global financial crisis, real estate in India gave positive returns in most instances. As many as 11 out of 15 Residex cities gave positive returns during the period, the only exceptions being Hyderabad, Jaipur, Kochi and Bengaluru.

The real estate sector also boasts of being a large employment generator, and hence is instrumental in the growth of cement, steel and connected industries. For every crore invested in housing, nearly 290 industries benefit; like building material with core manufacturing like steel, cement and bricks.

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