FACTORS AFFECTING REAL ESTATE PRICES

Real estate is the second important source which generates economy in our countr
y. Real estate almost contributes about 6 percent to gross domestic product (GDP
). Therefore the property prices, demand, supply and many more plays a vital rol
e in Real Estate Sector.
Infrastructure:-Infrastructure is always a major driver for price growth. Availa
bility of social infrastructure in the location will affect the demand. Places w
ith better infrastructure like rail and road connectivity and basic amenities li
ke hospitals and schools, car parking space, maintenance servicesa n d many othe
r benefits will lead to demand and increase in
the prices of property.
Location- Location is one of the most important factors affecting real estate pr
ices. Slopes, soils, hydrology, land availability, Distance to employment source
s, Distance to shopping, Availability of amenities (water, restaurants and shopp
ing, golf, parks), Neighborhood factors: age of surrounding housing stock, schoo
ls, crime and many more are the factors which affect the real estate prices. Pro
perties in such places affect real estate prices in positive sense. Good ameniti
es lead to higher prices and more demand
Sentiments - Positive sentiments in the market and economy will lead to better d
emand. People when confident about a sustainable source of income will be more c
omfortable in making property buying decisions.
Demand and Supply- Population change is the key driver of demand. When an area b
ecomes popular more people want to live there. Given there are fewer dwellings t
han interested parties, prices increase and vice-versa. The other driver is avai
lability of land.
The resources boom-The demand for skilled and unskilled workers is increasing da
y by day. And with an increase in their salary scale, these workers seek to impr
ove their lifestyle by buying bigger and better homes, or maybe an investment pr
operty or two.
Inflation- Inflation is a rise in the general level of prices of goods and servi
ces in an economy. As the prices of goods increase the whole money management of
people is affected. This affects the demand in real estate. Less demand leads t
o fall in prices of realty.
Interest rates- An interest rate is the cost of borrowing money. Among the many
industries affected by fluctuations in interest rates, real estate and banking a
re perhaps the most directly impacted. When interest rates increase, borrowing b
ecomes more expensive, dampening consumer demand for mortgages and other loan pr
oducts and negatively affecting residential real estate prices.
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Real Estate Business Includes: With the development of private property ownersh
ip, real estate has become a major area of business. Purchasing real estate requ
ires a significant investment and each parcel of land has unique characteristics
, so real estate industry has evolved into several distinct fields. Some kind of
real estate businesses include-
Appraisal Professional valuation services
Brokerage Assisting buyers and sellers in transactions
Development Improving land for use by adding or replacing buildings
Property Management Managing a property for its owner(s)
Real Estate Marketing Managing the sale side of the property business
 Relocation Services Relocating people or business to difficult country
Types of Ownership Interests: Real property (immovable property) can refer to th
e real estate
itself or to various types of ownership interests in real estate, including:
Freehold: Provides the owner the right to use the real estate for any lawful pur
pose and sell
when and to whom the owner wishes.
Life estate: An interest in real estate which is granted to a life tenant until
that person dies. The
interest terminates upon the death of the life tenant.
Estate for years: Similar to life estate but term are a specified number of year
s.
Leasehold: The right to posses and use real estate pursuant to the terms of a us
e.
Reversion: The right to posses the free interest in real estate after the expira
tion of a life estate,
estate for years or leasehold.
Concurrent or co-tenancy: The ownership of an interest in real property by more
than one
party. Rights of any single party may be limited in various ways depending on th
e jurisdiction
and type of concurrency.

Participants of Real Estate Market: The main participants in the real estate mar
kets are-
Owner/User: These people are both owners and tenants. They purchase houses or c
ommercial
property as an investment and also to live in or utilize as a business.
Owner: These people are pure investors. They do not consume but rent out or leas
e the property to
someone else.
Renter: These people are pure consumers.
Developers: These people prepare raw land for building which results in new prod
uct or the market.
Renovators: These people supply refurbished buildings to the market.
Facilitators: This includes banks, real estate grocers, lawyers and others that
facilitate the purchase
and sale of real estate.
The owner/user, owner and renter comprise the demand side of the market, while t
he developers and renovators constitute the supply side. In order to apply the s
imple demand and supply analysis to real estate markets a number of modification
s need to be made to standard microeconomic assumptions and procedures.
Real estate can divided into three categories: These are
Commercial
Residential
Agricultural
We can invest into all the given areas and can make return by capital appreciati
on, rental
income, agricultural produce, lease and commercial use.
The following factors influence the price and cost of the real estate:
1. The physical characteristics of the property
2. The property rights
3. The time horizon of holding the property
4. Geographical area
5. The development rate
Features of Real Estate Markets: In particular, the unique features of the real
estate market must be
accommodated. These include:
Durability
Heterogeneous
High transaction costs
Long time delays
Both an investment good and consumption good
Immobility