HOUSING

Factors affecting cost

of Housing

Presented To: Presented By:

Ar. Meenu Chaudhary Devika Ahuja
Manpreet Singh
B.arch. Sem. 8
Factors determining housing prices:

1. Location & Neighborhood

2. Supply and demand
3. Interest rates
4. Cost of renting
5. Economic growth
6. Affordability
7. Home improvements
8. Infrastructure
9. Availability of necessities and amenities
10. Disposable Income and Availability of Land
11. Size and layout
12. Parking
LOCATION AND NEIGHBORHOOD
• Buildings, real estate and properties, located in commercial and market areas,
hold higher value than their counterparts in the residential areas.

• Similarly buildings which are constructed on freehold land tend to command a

higher valuation than those on leasehold plots.

• If a location is very close to commercial or market areas, then the house prices
are higher as compared to counterparts in the residential areas.

•A house in a rural or less developed area will always cost less than those in the
well developed or urban area.

• Also, a location with a great accessibility to highways, expressways, schools,

shopping malls and local employment opportunities contributes to the added
house value.

• While a popular neighborhood is seen as a hub of prestigious schools, public

transportation links with lower or negligible crime rates.

• A short distance to a school or a place of worship enhances the property value

and stands to hold premium price.
SUPPLY AND DEMAND

• Demand for real estate in a particular area is inversely proportional to its

supply.

• As the supply or availability of real estate decreases, the valuation of

property increases.

• Changes in population are the key drivers for demand.

• Along with an increase in the number of people inhabiting a particular

area, the popularity of a particular locality in terms of people wanting to be
a part of the locality also increases its price.

• Put simply if demand for houses increases faster than supply, then house
prices go up.

• For house prices to fall the demand needs to fall.

INTEREST RATES

• When interest rates rise, mortgage lenders generally increase the cost of
variable mortgage payments.

• These higher interest rates in turn make home buying less attractive.

• Even a small change in interest rates can have a big impact on the
affordability of buying a house.

• Another factor that determines the effective demand for houses is the
willingness of banks to lend mortgages.

• If banks give mortgages with bigger income multiples, then the effective
demand for houses is greater.

• The willingness of banks to lend mortgage finance can vary depending on

the strength of the interbank lending sector.
COST OF RENTING

• If the cost of renting rises, then households will make greater efforts to
try and buy a housing as buying a house through mortgage becomes
relatively cheaper.

ECONOMIC GROWTH

• As the economy grows and wages increase more people can afford buy a
house, this in turn increases overall demand, which increases prices.
AFFORDABILITY

• Rising incomes mean that people are able to afford to spend more on
housing.

• During periods of economic growth, demand for houses tends to rise.

• Also, demand for housing tends to be a luxury good.

• So a rise in income causes a bigger % rise in demand.

• The process of retaining a property after the costs have been incurred by
the owner is referred to as affordability.

• To put more simply, it is described as the relationship between the house

prices, interest rates and wages.

• So, if any of the given variables reaches its maximum level in a specific
area, then the inhabitants start finding a better lifestyle elsewhere.
HOME IMPROVEMENTS

• Updating kitchens, replacing flooring, repainting walls and adding

landscaping can add to the value of a home.

• However often homeowners spend too much and don't get the return on
investment when they sell the house.

• Upgraded kitchens and bathrooms are among the most important

upgrades cited by homebuyers because they represent a major expense if
the buyer has to upgrade them.
INFRASTRUCTURE

• Infrastructural development is one of the most important factors which

influence real estate prices in India.

• The presence of roads, airports, flyovers, malls and bus terminals and
other facilities in the vicinity of the property, helps in value escalation of
the same.

It is a known fact that connectivity is one of the most important

requirements for investors looking towards purchasing land or property.

• This leads to the concept which explains a rise in the valuation of

property which is well connected to entertainment hubs, medical facilities,
educational institutions, retail markets and business centers, along with
other day to day facilities.
AVAILABILITY OF NECESSITIES AND AMENITIES

• There is a certain set of features and amenities that have high desirability
or appeal as from a buyers perspective.

• If a house happens to have features such as modular kitchen,

underground drainage system, intercom facility, it is going to command a
pretty good price.

• Furthermore, infrastructure facilities like club house, kids play area,

jogging track, swimming pool, gymnasium, covered parking lots, 100%
power backup, library, yoga center, 24/7 security, etc. are provided within
the township or community surely have a significant impact on the house
prices.

• Valuation of property is clearly based on the availability of necessities and

facilities connected with comfortable housing.
DISPOSABLE INCOME AND AVAILABILITY OF LAND

• Disposable Income
Properties which are located in agricultural areas or those dominated by
manufacturing units attract a lower price than those situated near the IT
hubs. The valuation of property is in direct proportion to the quantum of
disposable income in the hands of the purchaser or the majority of
population in that area.

• Availability of land
In places where there is ample land available for residential purposes or
development of real estate, the graph reflecting the valuation of property
shows a slower rise than in areas where land is comparatively scarce.
SIZE AND LAYOUT
• The larger the square foot of the house, the more expensive it can be.

• Also, the number of bedrooms largely influences a home’s value.

• So, a house with the several numbers of bedrooms is more likely to have
high curb appeal as opposed to a villa with just one bedroom.

• While in some cases, an open plan design layout can be more appealing
than a boxy space of the same size.

• Moreover, the house which is newly built or is in immaculate condition is

always speculated to hold highest market price than the one that needs
remodeling.

PARKING
• We all know that parking is at a premium in our big cities so if a home
has parking or even a garage this can significantly increase the value of a
home.
THANK YOU