Real estate continues to be a favored investment globally, offering the potential for life-changing financial gains. While many diversify their portfolios with stocks, bonds, and gold, real estate investment often remains undervalued. India's economic growth has fueled increased average incomes, providing more capital for investment, and real estate presents a compelling opportunity.
Property prices hinge on several factors: location, supply and demand dynamics, interest rates, and planned future developments. Savvy investors purchase properties anticipating price increases driven by low supply, aiming to capitalize on future market conditions.
What is Appreciation Rate?
In real estate, appreciation signifies the increase in a property's value over a period. Appreciation offers several advantages. A higher selling price in a strong market translates to greater profit.
5 Reasons for Property Price Appreciation
Demand & Supply
Increased housing demand in a specific area drives up property prices, especially if new construction lags. Buyers seeking homes for personal use are often prepared to pay premiums in desirable locations. The optimal time for purchasing in high-growth areas is before significant investor activity begins.
Property Features
A property's amenities and upgrades directly impact its value. Renovations, such as installing wooden cabinetry or finishing a basement, can significantly enhance value. Adding bathrooms or upgrading flooring are further examples of value-adding improvements. Parking availability, particularly in metropolitan areas, significantly influences property values, potentially adding a 10% to 15% premium.
Owners consistently upgrading their properties often achieve higher returns. This can be through basement garages, kitchen enhancements, or gardens. Architectural design, meticulous property maintenance, and interior aesthetics also play crucial roles in property price appreciation.
Location
Location exerts a significant influence on property value. As an area develops, attracting new businesses and employment opportunities, local housing prices tend to rise. Conversely, economic downturns or business closures typically lead to lower property values.
Local Development
Robust social infrastructure and local development are essential for property price appreciation. Properties within gated communities with active Resident Welfare Associations (RWAs) are generally preferred over standalone properties. Green spaces, security measures, and local amenities further enhance property value.
Infrastructure Development
Infrastructure development plays a critical role in property price appreciation. Projects like improved transportation networks stimulate population growth and boost demand. Investors who accurately anticipate market trends can maximize returns on their real estate investments.
Impact of Government Policies
Government policies, particularly interest rates on loans, directly affect property values. Lower interest rates stimulate buyer activity, increasing demand and driving appreciation. Reductions in stamp duties, GST rates, circle rates, and income tax exemptions also influence demand. The Real Estate (Regulation and Development) Act 2016 (RERA) has fostered buyer confidence, promoting transparency and streamlining the home-buying process. RERA empowers homebuyers to address developer misconduct, such as property rights violations or unauthorized master plan changes, thereby strengthening the real estate industry's integrity.
Tips to Improve Property Price Appreciation
While the national average property price appreciation rate typically ranges from 3% to 5%, specific factors can influence long-term returns. If appreciation falls short of expectations, several strategies can enhance property value:
- Enhance Energy Efficiency: Improving energy efficiency through measures like EnergyStar appliances, solar panels, or strategically planted trees can gradually increase a property's value.
- Increase Square Footage: Expanding living space, such as adding an Accessory Dwelling Unit (ADU), a guest house, or finishing a basement, boosts value.
- Make Strategic Improvements: While upgrades can add value, it's crucial to choose wisely, as some renovations may not yield a positive return or even diminish existing value.
Also read:
Property E-registration begins from October 2, Maharashtra revenue minister
Karnataka government’s to cut guidance value, can boost property market!
Tips before you consider a Duplex house for sale in Bangalore!