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Reasons why the real estate market is so hot

Posted by kapoor Infra on November 1, 2021

Welcome to Kapoor Infra Real Estate Blog. Today we are discussing why the real estate market is so hot? What is the reason behind this? And why Indians always walk for the property.

The real estate market has always been hot and will continue to be hot. Because there are many reasons behind this. which we will reveal next.

Let’s understand the need first before knowing the reason.

Why Real Estate Important? And why should you invest in real estate?

The real estate sector is considered to be the cornerstone of the economy of any country. Because no country can grow without infrastructure. Development plays a big role in the progress of the country.

Real Estate contributes 6-7% to the GDP, apart from being a large employment generator. The health of the real estate sector, in fact, has a strong bearing on consumer sentiments, and housing—as we all know—also has socioeconomic implications.

And benefits of investing in real estate are that Real estate investors make money through rental income, appreciation, and profits generated by business activities that depend on the property.

The major benefits of investing in real estate include passive income, stable cash flow, tax advantages, diversification, and leverage.

So, now let’s take a look at

Reason why the real estate market is so hot.


#1 Very limited inventory, and too many buyers:

The top reason why the housing market is so high right now has to do with limited inventory or supply.

Real estate values are generally influenced by the supply and demand for properties as well as the replacement cost of developing new properties.

Actually, the land is limited and the havoc of the population is increasing, in such a situation there is a shortage of land for development and people are taking it. Due to which the price of real estate is also increasing.

#2 Record Low Mortgage Rates

Mortgage rates are only one interest-related factor that influences property values.

Because interest rates also affect capital flows, the supply and demand for capital, and investors’ required rates of return on investment, interest rates drive property prices in a variety of ways.

Interest rates can affect the cost of financing and mortgage rates—changes in capital flows can also have a direct impact on the supply and demand dynamics for a property.

The most evident impact of interest rates on real estate values is in the derivation of discount or capitalization rates, as they are equal to the risk-free rate plus a risk premium.

#3 Rising Incomes and Inflation

Property prices and rentals tend to rise when inflation rises as a property owner or landlord demands higher returns to offset rising input and consumption costs.

Thus, real estate is also a physical asset that has a high correlation with inflation.

REITs and Real Estate ETFs invest in a pool of real estate assets and are a better way to gain exposure to this asset class rather than investing in tangible physical land, residential, commercial, retail, or industrial property.

Must Read: Real Estate Investment in India

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