Real Estate can be categorized into two types, namely, Residential Real Estate and Commercial Real Estate. Residential real estate market is basically concerned with the construction of the buildings and homes meant for residential purposes. On the other hand, Commercial real estate market deals with the construction of the buildings and apartments specifically meant for official and commercial purposes.
A high degree of correlation has been observed between the growth rate of both economy and the Real Estate. Another observation highlights the fact that at the time of economic uptrend the performance of the real estate sector remains phenomenal. But at the later stage of the boom period, the commercial real estate sector jumps to the fore and performs extraordinarily. Thus, it has been empirically proved that the commercial real estate market reacts with the boom but with a lag.
Some of the aspects that help Real Estate
Economic growth of a country.
Money trickles down to all sections of the people.
The fruits of the economic growth are first relished by the urban society. Thus, a huge migration of people are observed from rural to the urban places. This migration leads to the increase in demand for more residential places.
Economic growth gives enhanced profit to the Corporate sector. Large parts of the profit is generally used for enlarging the business. Thus, along with increase in business opportunities, the demand for office spaces increase and consequently the commercial real estate market flourishes.
Now, let us visit the market conditions of this sector in some of the important countries.
Real Estate Market in USA
In the year 2005, this market has seen a phenomenal rise. Los Angeles has itself observed a phenomenal rise in the prices of residential real estates amounting to above 14 % during the five year period between 2000 and 2005. But in the year 2006, this market has seen a fall in their sales. This excess supply has caused glut in the market with unsold new houses piling up. Current condition worsened when the mortgage market panicked and the stock market evidenced heavy decline in prices of the real estate companies. Thus, the housing market has seen a declining slope in the year 2006 which is continuing till date. But this fall is partially compensated by the phenomenal rise in the commercial real estate market which has increased at the rate of twelve percent in the financial year 2006.
Real Estate Market in India
This sector is passing through a booming phase during the present time. According to the CEO of a real estate development company, Dun & Bradstreet real estate industry in India is increasing at a break-neck speed of around 30 %. This industry is contributing around seven percent to the national income of India. The total amount of loans forwarded by the financial institutions including the banks has seen a phenomenal growth of around twelve thousand crore rupees between the year 2005 and 2006.
Economywatch Team
Indian economy
Article from articlesbase.com
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