Your Lack Of Information May Cause Artificial Price Appreciation

During your home purchase drive you would have come across situations when the price quoted by the developer and by the broker and by the financer would have varied Usually, the latter in this case, is the underwriter touting attractive deals to woo buyers. This varied prices which they offer their properties at can even cause an artificial appreciation in the market. Naturally, for any buyer, the best deal is where he gets the property for the cheapest price. But, what if you couldn't get hold of that steal deal? Your lack of information about pricing could spoil your future plans about the house, especially if you are not an end-user.
 
What are some of the real reasons for price rise?

• Land available: Any piece of land or plotted development can be put to good use if it is either cultivable or has the capability to be converted into a commercial or residential development. The prospects of this land can help it accrue a healthy appreciation. However, always refer to a formal index for the real estimated value of a particular property. Compare these on various property portals to see variation or similarity in asking values.

Also read: Economic Survey 2017: Property Prices Will Fall, Loans Will Get Cheaper

• Increased FAR: Increase in the Floor Area Ratio or FAR also leads to a pump in prices. While it gives the developer an opportunity to build more, it also makes the value of land go up. However, if you are interested in such units, you may want to confirm with the corporation about the existing rates of land before somebody else gives you any other reason about why a particular piece of land is in.

• Other reasons: If a seller is quoting a higher value, it may be due to these reasons: 
  -Genuine capital appreciation
  -A branded developer who is providing better amenities
  -A luxury unit
  -Demand drivers like schools, coaching centres, job districts, SEZ's in vicinity
  -Miscalculation or over-estimated price due to lack of genuine valuers
  -Goal to make a certain percentage gain in comparison to the cost price

At such times, it is better to consult professional valuers who weigh a house in terms of market standards.

• Interest rate cut: In the recent past, the interest rate cuts by top banks made the market lucrative. It is clear that even though property prices remain stable, the impetus to buy can only find a vent if the financials fit. The higher the interest, the more reluctant buyers are because it makes the property expensive. However, this is perhaps the only area where you can be at peace because the interest rates put forward by banks are usually transparent. Your work starts at the point when you want to compare these rates with that of other banks.

Also read: SBI, PNB, Citi India Slash Lending Rates, Affordable Homes To Get More Affordable

• Inactivity in the market: An inactive market can artificially blow up prices, too. Or even when prices are stable, there is enough room for varied price points. However, there is a pull factor, too. There are attractive offers, discounted prices, freebies in the form of gold coins or cars. At such a juncture, what makes you sure that in real terms these are real freebies or is the cost latently added to the price of the property? An active market, on the other hand, could also be a hotbed for many dubious activities. But, most buyers now are up to date with such malpractices and make an effort to keep away from unstructured sellers and fake schemes.

• Demonetisation: The fair price of land is always less than the black market value. However, it took so many years to bring about a demonetisation drive. Despite the drive, noted economists and analysts doubt the effectiveness of demonetisation in real estate and therefore, it points out at a larger, more rooted issue of the presence of black money component which helps some evade taxes in exchange for a seemingly value-for-money deal. In such cases, you as a buyer lose more than you might be saving. 

Also read: Expecting Property Price To Fall After Demonetisation Move? You May Be Disappointed

• Speculations in the market: Speculations can often lead you to buy at a higher price because there often are as many speculations as there are potential buyers. A fear of prices to rise in future can coax you to consider now than pay more later. However, at such times, it is better to side with valid facts than give way to rumours. Any genuine reason for price rise cannot become too costly to afford. Similarly political uncertainty, false scarcity, over or undersupply, etc can affect demand or pricing strategies. Base your decision on concrete facts than hearsay.