The Sensex and real estate market in India work almost in tandem. Both offer great returns on investment, are key contributors to country’s economy, help to build assets over a period of time, etc. The euphoria of 2008 which saw the stock markets touching all-time highs also rubbed on real estate sector, and the property markets across segments in all Indian cities had touched new heights. However, the downturn that followed did not affect the property market much even though the Sensex crashed by more than 50 percent. It took the markets six years to recover and to again touch new lifetime highs in January 2015. Hence, it is important to understand the different parameters including the risks and opportunities that are associated with both these assets –
Rise in Sensex Leads to Increased Property Prices
The Sensex is a reflection of true Indian economy. The rise in stock market indicates that there is a sense of optimism amongst the business tycoons, industrialists and institutional investors in India, the market sentiments have improved, there are more jobs been created, regulatory hurdles have been taken care of and the country is in the path of development. The other factors that directly impact the markets include the stability of the central government, forex reserves, value of rupee against the other leading currencies of the world including dollar, pound and euro, current account deficit, reform measures being undertaken by the government and the global crude prices. If most of these factors are positive then the Sensex will rise on most days and could even discount the global cues. With the market rising, people make more money, there is more liquidity in the system which can be utilized by the law makers to develop country’s infrastructure, thereby positively impacting the growth of real estate industry. Better infrastructure directly means increase in property prices across the segments.
Stock Market Crash Leads to Slow Down in Real Estate Industry
Stock Market euphoria leads to increased property prices, at the same time market crash could lead to slow down in property sector. This is because liquidity dries up, interest rates go up and there is no easy money available. This is not all; the crashing of Sensex could lead to a recession kind of situation as most small and medium enterprises go out of business leading to steep loss of job and the volume of realty transactions also goes down considerably. Though the prices in realty sector do not fall like stocks and it has never happened that prices correct by 10 percent to 15 percent within minutes or days or even months but the slowdown is evident as there are no buyers.
The rise of branded property selling websites has ensured that the impact of these falls in Sensex is minimal on realty sector. This is because these sites have brought the end users and retail investors in the market by giving them the platform to advertise, sell, rent and buy properties at almost no cost. A reliable online real estate portal like Housing.com allows all its users to post add for rent, buy or sell for free of cost and helps them in each step of their transaction. It has a huge customer base in India as well as abroad and lets them to transact in property with complete ease and convenience from the comfort of their home or office. It has brought the much needed liquidity in the real estate industry by increasing the retail participation.