The economy has come out of recession, "reality is booming”, and "prices are sky high" - "invest in property, there is a tremendous potential”. 

We keep on hearing all this in newspapers, TV, and the Internet. Even if you step into a meeting, this is one of the hot-button topics that is definitely discussed.  

There is no doubt that prices in major cities of India have seen a steep rise - but has the appreciation been as high as 70% to 90% - is this just a hype or is true.  

Secondly, has the appreciation been witnessed across India or is it limited to a few select cosmopolitan cities?

Tier II & Tier III cities still not out from recession

If we talk about Tier II and Tier III cities, property in these cities is still at the same level as it was when the recession started around two years ago. Though there have been major corrections in the property prices in these cities, they have still not come out from the recession while the world and India have came out of it.

While on a visit to my native state, Punjab, I was in conversation with a leading property consultant in Amritsar, Kohli properties - I was informed that prices in and around Amritsar did see a major correction of up to 20-30 %, yet property is available at the same price.  

Also, while people are ready to sell, there are as not many major buyers available to grab them. Even in the commercial segment, while property is available on the main GT Road, a four-lane national highway , it is unable to attract major buyers and neither has there been any major price hike.

Even in other major cities of Punjab, like Jalandhar and Ludhiana, property price are facing the same fate as in Amritsar. Surya Colony, one of the posh localities of Jalandhar and constructed by the improvement trust, has seen no rise in property prices and even significant buyers are shying away from the place.

Escalation in prices because its actual-demand based

While prices in Noida and Ghaziabad have seen a steep rise, other cities of Uttar Pradesh like Lucknow and Kanpur have seen prices go down by 30-40 % and have yet to recover - forget about any escalation in prices. The same story is repeated in Rajasthan and Gujarat - after the recession , prices never came back to the levels from where they went down. The biggest surprise is that while infrastructure is reasonably well developed all these cities, it's not actually helped in raising prices in these areas .

The biggest difference in realty sector perspective after the last recession is the change in customer outlook. Now, escalation in prices is because its actual-demand based and not investor based. All Tier I cities have genuine demand, real end users who actually want to buy a house, which has led to a stupendous increase in the prices. Price escalations in the NCR are purely demand based and with time, this demand can only increase as these cities have the potential of creating job opportunities for tens of thousands of people.

It is a good idea to invest in Tier I cities, as these will be the first choice for all leading industries, which will create thousands of jobs.

SOURCE: The Economic Times