Developmental Influences On Property Prices- How Real?

I remember that about three decades back, whenever there was developmental activity in an area

, say the laying down of new rail or road links or construction of the bridges and flyovers, laying of sewerage pipes and other such developments which were of common good to the public and were expected to be used by them, the prices of properties hardly ever appreciated. When i compare this with the trend which prevails nowadays, the distinctions are stark. The same type of activities, if carried out in the present day, would see a significant appreciation in the prices of properties of the area even if the people living in the area are not very likely to use this service. Development is assumed to be a necessary and sufficient condition for the price appreciation in the present times, even if this development is of remote use to the people living in the area.

Development stimulates high demand

Would you like to go to live in society where there is no regular supply of electricity, erratic water supply or non-existent roads? Even if the society like Piyush Heights provides all the amenities and facilities within the society complex for living, it is the development of the exteriors, which are to be used by the public at large which will push the demand for residences in the area. The sluggish is the progress on the development front, the sluggish will be the demand and hence the prices will also remain subdued. These are either not likely to increase or will increase very less. It is when these infrastructural initiatives are undertaken that the real outlook of the area will show up and this will help in stimulating demand for the real-estate.

Are price hikes disproportionate?

There is no way to judge the extent to which the price rise will happen with the development of a region. The price hikes sometimes do not happen at all and sometimes, these are disproportionately high. The main reason for this discrepancy is the level of demand for the real estate in the area. But, there is an interesting twist here since the developers or the builders might increase the prices of their projects as the development progresses without the increase in the demand levels. Since this price rise is not backed by the rising demand but only by the decision of the builders to increase the prices, this reduces the demand further since the genuine customers might be turned away on noticing the price rise.

If you see that the prices of the properties have increased disproportionately as compared to the extent of developmental work being accomplished in the area, you can conveniently assume that the price rise is the result of decision of the developer and may not be due to the rise in the demand.

by: kamal bhatt

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