Let us accept it, predicting is difficult especially if it is about the future.
Having said that let me tell you that predicting RE returns and prices is possible in an advanced country where you have the following information available in a public forum:
Prevailing rents, local taxes, local growth rates, infrastructure, number of new licenses for construction issued, the demographic details of a place, details of transactions, registered brokers filing details with a regulator, etc.
In a country like India where all this information is either not available or available only to a few people, seeing a trend is very difficult. So people come up with theories which look correct, but is completely wrong. Let us look at this:
Virat Kohli has 5 scores of 22, 282, 67, 0, 184*
If I gave you the details of his diet, sleeping habits, gym timings, etc. etc. will you be able to say what will be the NEXT 5 scores? No. However people think that they can predict the price of RE on the basis of the past few years.
For example take a place like say Kharghar in Navi Mumbai. From about 2006-2009 the prices moved up very slowly, and frustrated the investors. However from 2009 to 2011 the price rise was exponential, and prices went to a nice new high in 2011. However from 2011 to 2014 it has been growing at a slow pace and many of the builders and brokers are struggling.
In 2014, there could be a ‘next’ step of prices going up and may go up till say 2016.
If you want something in common, 2009 had an election, and so did 2014.
Makes sense? NO, NYET, NEIN, NAHI.
It is convenient for the human mind to find such a pattern – and it may (or may not) be right. That is the risk.
The best thing to do is to see the year by year diagram of the prices over a 20 year period – and see the periods of growth and stagnation. Be ready for the ‘time correction’ to be followed by a spurt. And a spurt to be followed by a ‘time correction’. However, when the demographics of a locality changes, the logic of price change also changes.
Difficult to predict? NO. Impossible – especially if it is your own money.
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