Real estate realistic or not
Real estate investor had made money in recent 10-20 years. Why real estate is going so high price. To understand that there is a need to understand the city, city development and city life and city inflation.
People say that city land cost increase because of the cost of brokerage. Yes, it may be the reason but that cannot give the full picture. My study says a city like Jaipur has 26% growth rates in land cost from the last 20 years. It may be about 30 to 32% of cities like Delhi or Mumbai. Though everybody knows that general inflation is about 8% in the last ten years. So why real estate is growing so high.
The urbanization process is a continuous phenomenon. So every city is growing in India. From Sensex data, Indian population growth is 20 to 25% per ten years. But when it comes to the city, the average city population growth is about 50 to 60% in ten years. So about more than double increase in city population growth. That is the first key feature for real estate rates growth.
Secondly, it is known that man’s last future financial goal is to save and purchase home and office, etc. Because food, cloth, and other life equipment come first when they needed. So it takes time to invest in any real-estate option. Because it comes in secondary needs. Because the primary need to have a home is fulfilled by rented or old parent’s home.
Thirdly – In city life in India everybody wants to live in the center or near the center. But the man goes far because of the scarcity of land or higher cost of land, so he goes to near the center.
Now, this study tells, how real-estate growth rates come.
The first step of growth rate is inflation that is about an average 8%. But secondly, it is seen that human resource cost’s growth rate is about 16% in the last 10-15 years. For example, the cost of civil labor in the city was Rs. 90 per day that is Rs. 300 per day today. That is increased by about 16% per annum. That is also in case of salaried government personnel to private company’s personnel.
Because man income is increasing by 16% per annum. It is seeing that a major portion of that growth is going in real-estate. Man who would purchase a home in 50 to 60 year of age. He is purchasing now in 30 to 35 year age because of the facility of loan.
Bank loan facility gives man attraction towards real-estate. So major portion 4% of human resources grown rate is connected into the real estate growth rate.
So from above all statement these equations arise-
1. If the city has no increase in population (any type)
Than
City real-estate cost growth rate = inflation
= 8% (from last 10 years)
2. If city increase 50% population in 10 years or 4-5% in every year.
than
city real estate cost growth rate = inflation + population growth +
+ actual growth HR cost
+ growth pressure to the centre
= 8% + 4% + 4% + growth pressure to the centre
= 16 + city growth pressure.
Like for example if the city is in today state (T=0) have a condition at D. That was condition a T = -10 years (10 years back) at c. Because condition at the area was the same as today at d and at c before ten years. Then their land rates should be same at t = 0 at D and t = -10 at c but that may be the same when only inflation and other factor is may be considered. That is 16%.
But when we study the cost of real estate today at c. It includes a center city pressure growth. Which may be different from different cities. Like in Jaipur it may be 10% or like in Delhi and Mumbai it may be 15% per annum.
So city real estate cost growth rate.
= 8% + 4% + 4% + (5 to 15%)
5% in case of small town capacity 20,000 person, whie 15% in case of big metro city 1 crore.
So the above study says that the main reason for high rates in cities is high HR cost, high population growth, and high city center pressure. These whole items give a demand for real-estate. Brokers share the growth rate profit but not increase the demand for real estate.