Real estate investors buy properties when they know the property will gain in capital appreciation, but it’s not just real estate investors who are drawn to this phenomenon. There is also more interest in buying property in Pune than rental property as real estate appreciation allows them to increase their personal net worth.
What causes property prices to rise in areas like Pradhikaran and other parts of Pimpri Chinchwad? This phenomenon, a key concept behind real estate investing, is called appreciation, which is nothing more than the improvement in the market value of a property over time. Real estate appreciation occurs due to several factors, including:
• The dynamics of supply and demand for a particular location
• Inflationary pressures
• Mortgage loan interest rates (cost of loan)
• Arrival of new drivers of the real estate market in one place
• Population growth
Demand and supply: When there is increasing demand for homes in a given area, property prices go up if the number of residential real estate projects isn’t picking up fast enough. In other words, own-use buyers are willing to pay more for a property because they find it desirable to live there.
This demand attracts property investors, who buy properties there to sell at a profit when supply slows again. This causes the prices of the properties in that location to increase even more. The time for own-use buyers to make their purchase is before investor activity begins in earnest in locations with high appreciation potential, such as Pradhikaran and Ravet in Pimpri Chinchwad Municipal Corporation.
Inflation: Inflation is the result of an excessive amount of money in circulation, and this overabundance of money causes its value to decrease. When this happens, prices go up for a number of things, including land prices, building materials, labor, legal building permits, and many other things.
However, inflation alone cannot cause property prices to rise in an area if the area itself is poorly accessible, lacks infrastructure, or faces an oversupply of real estate projects. Township properties in Pimpri Chinchwad are completely insulated from these negatives due to superior road networks, infrastructure that is well in advance of that available within PMC boundaries, and strict development laws that prevent oversupply.
Mortgage Loan Rates: The behavior of interest rates on mortgage loans also has a direct relationship with the appreciation of the property. When interest rates on home loans rise, demand for properties slows because fewer buyers can afford to shell out the extra money required by banks. In the same vein, a sufficient decrease in home loan interest rates increases affordability and increases the demand for property.
Real Estate Market Drivers: Market drivers can be defined as developments in an area that increase the value of living there. In the case of Pune, municipality properties are now known to encompass many or all of these factors, which may include:
• The establishment of a new workplace (such as an office complex)
• A shopping center or entertainment complex
• Zoning regulations that do not allow excessive construction projects, thus increasing the overall ambiance through more open space, green areas, etc. (The Pimpri Chinchwad area of Pune is a perfect example of development controlled through far-sighted zoning regulations.)
• Transportation facilities that make the location more accessible by road, air, or rail
• Infrastructure projects that increase the quality of life in the area (such as dedicated water and electricity supply, public gardens, etc.)
• The proximity of schools, colleges and health centers that reduce travel time to essential services.
For example, strategically located township properties in Pune’s Pimpri Chinchwad Municipal Corporation represent high property appreciation potential because they include these and other key market drivers.
Population growth: Similarly, population growth in an area like Pradhikaran naturally increases the demand for residential property there, and this directly translates into an appreciation in property rates.
