5 reasons why real estate prices are set to follow equities higher

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Indian stock markets have already rallied sharply in the last few weeks and it's likely that the Indian real estate markets could now see increased activity, given that a new stable government at the centre has taken charge under Narendra Modi. Here are 5 reasons why real estate prices may trend upwards.

If govt manages to reduce inflation, RBI may cut interest rates

Analysts feel that interest rates may have peaked and any drop in interest rates, always tends to benefit the real estate sector. This is because the real estate sector is heavily debt ridden and drop in interest rates could boost development and demand.

Swift action from the new government

The Urban Development Ministry is likely to repeal existing restrictions on real estate firms by allowing foreign investment up to 49 per cent. This will help the real estate sector access foreign capital at competitive rates and reduce dependency on Indian banks and financial institutions. Foreign capital for slum redevelopment projects is also expected to see major relaxations. 

A good time to buy says survey

"Almost six in ten (57 per cent) Indians think the next 30 days will be a good time to buy real estate, such as a house, vacation property or investment property," Ipsos said in a statement. Founded in France in 1975, Ipsos is an independent market research company controlled and managed by research professionals.

"With the formation of a new stable government at the Centre, the consumer sentiment which was low in the last 2 years has improved significantly. The stock market has already reacted in a positive manner reflecting this change, the real estate prices are expected to go northwards by the end of the year," said Bhasker Canagaradjou, Associate Director, Ipsos Business Consulting was quoted by PTI as saying.


Lower EMIs may boost demand

A drop in interest rates means lower home loans rates, which could boost real estate demand and push real estate prices lower.

A new impetus likely

The new government is sure to give a boost to the sector by expediting the process of granting regulatory approvals. The Real Estate Development Regulation & Development bill, which has been a long pending demand maybe taken up and passed. This would be a big positive for the sector. 

Read more about: real estate
Story first published: Thursday, May 29, 2014, 8:51 [IST]
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