Financial Year End, General Elections, Uncertain Equity Markets: Doom for Real Estate?

Our regular readers must have noticed that we have become quite inactive recently. We are not posting, sharing our opinions or exchanging our experiences with our readers on a frequent basis. Well, you are correct here! We have become dormant from last 2 months just as the sector itself looks inactive due to several reasons. Let’s have a look at these reasons & their effects on the Real Estate.

Financial Year End

World may celebrate new year’s eve on 31^st December but for corporates and financial world, the new year eve is on 31^st March. All the financial books and accounts are settled in the March-end. Every year around this period, the real estate and investment sector suffers a seasonality blow. People generally hesitate from making new investments in any asset class around this time due to taxation issues & paper formalities.

This is one of the reasons that there is no noticeable activity in Real Estate from last 1-2 months.

Equity Markets

Due to the General Elections in the largest democracy of the World – India, the equity markets are experiencing a roller coaster ride. With strong wave of change in Government, the markets are reciprocating in a non-deterministic manner. This is creating a huge confusion and restlessness in the equity and investment markets and investors are shying away from making any investment until the markets achieve stability.

This restlessness has also been passed to real estate which is adding more to the realty doom.

General Elections

As discussed in our earlier post, Effects of General Elections, 2014 on Real Estate <link>, the General Lok Sabha Elections are creating a lot of turmoil in Indian Realty Markets.

Closing Remarks: All the above mentioned factors are creating a negative environment for Real Estate but very soon the market will bounce back to greater heights.

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Effects of General Elections, 2014 on Real Estate

As General Elections are round the corner in India, speculation market is also high about the Real Estate scenario post elections. Only time will show whether property market will experience a boom or bane or remain intact. But till then, let’s do our work, speculate based on analysis! Please note that we will not support any political party in this post, but just give our opinion on Real Estate influence.

Various Scenarios Post-Elections

There can be only following 2 scenarios after General Elections:

• Existing Government is reelected
• New Government is elected <link>

In both the scenarios there ought to be some changes in the existing market, both economic & financial. Of course the change would be more apparent changes in case the government is upturned. It is a known fact that Property market is highly affected by the health of economy & finance in the country.

Effect of Financial & Economic Market on Real Estate

Financial Market

Economic Market

This comprises of securities, stocks, trade and exchange rate markets in a country. Basically all the investments of the nation come under the financial markets. Financial Market controls the wealth of a nation and its citizens which in turn affects the investment in real estate. With a change in the politics, definitely there will be changes in the foreign investment policies of India and that will impact the way investments are made thereafter. Even if the Government remains intact, this market is in for changes. This is because; currently the policies are being formulated keeping in mind the vote-bank. Once the elections are over, policies will be reformulated and that will affect how investments are made in Real Estate.

This includes the interest rates and policies formulated by the Reserve Bank of India (equivalent to Federal Bank). The rates at which loans are disbursed come under its scope. This decides whether an individual or a group will be able to finance the investment and to what extent. A change in politics will not have any direct or visible impact on the economic markets as it is controlled by an independent body, RBI. But yes, indirectly there will be a lot of effect here as economic policies have to be synchronised with financial markets. Any non-synchronisation would lead to halted growth and inappropriate levels of inflation in the country. Real Estate will definitely get affected in this case also.

In the above discussion, we have shown that financial and economic markets will experience changes after elections, which in turn will impact the property prices. Many of you must be wondering whether this impact would be positive or negative! The answer is – “we don’t know!!” Positive or negative, high or low – everything will depend on the policies that the government forms.

One thing we can say with 100% confidence is that there will be changes in real estate scenario in India for sure and historically it has been seen that a change results in better.

So choose your votes rationally!

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