The stock market downturn after a continued bull phase seems to have finally impacted the real estate market and it once again confirms the deep relation of the two markets, which complemented each other most times, through thick and thin. However, in the present-day situation, there are macro and micro factors and it is imperative to understand, relate and then act accordingly to understand what is happening around in the market. Higher interest rates, double digit inflation topped up with a bit of a political instability on the horizon has also led to the financial and liquidity crunch and these can be considered as macro factors for the current phase.
Now, let us go back a few years and look at the entire real estate story. The past three years have been the best ever for real estate. This was also possible because the stock markets were booming, there was industrial growth all across and with political stability there was definitely a vision and, of course, the infrastructure development, launches of several projects by many top developers across locations and other factors added to the glory of it.
People had disposable incomes because of the stock markets (read: unconventional income) apart from their regular incomes out of the overall booming businesses to invest in real estate and create an asset and the pricing was looking attractive and the outlook was promising to the extent of the fact that people could see their money and investments yielding returns both from capital appreciation/lease rent returns in a short span.
Take the case now we have the opposite happening and all connected are sure they are witnessing to the state of affairs in the stock market today. There is a cloud of political instability, financial markets are down, people have nearly lost their profits and their principle amounts invested and the same are also looking to be at stake now.
Owing to all this, there is a little bit of a slowdown in the economy and a lot of small and big fears. Varied factors have tamed the mindset of people and turned them conservative. The increased burden of EMI, which was 7% in year 2004-5, is now become 11% plus is a big deterrent to a lot of home buyers as they have to look more seriously at their monthly budgets.
The valuations of property prices, which were looking strong, have started looking a little bleak. Today, only the people who have money or the need to buy a home will be buyers in the property market. These can be safely termed as micro factors. The market as on date is not majorly impacted but at the same time the general feeling which has been witnessed is that people are waiting and watching and may grab a deal which makes sense to them financially. Also, if you look at the future prospects it is become a bit unpredictable and hence the inevitable slowdown will be haunting the market for a while.
Monsoons are generally a slow period, but let us look at the micro picture and ground realities a bit deeply. Mentioned here are a few categories of buyers in the market. With the categorization of the buyers we see that the demand may be existing but it is very different and scattered across various segments and the market should also offer products to sell in the same segment, and only if the parameters of both the buyers and sellers match then things can move.
It should also be noted that a lot of people have already bought homes and they are the executives working for MNCs, corporates, banks and so on. Many business families are also invested already in a small and big manner. The very fact that the buyers are finding properties unaffordable means that the cycle will slow down and hence the micro factors will play a big role in coming months.