SUBJECT MATTERS

•INFLATION IN INDIA•REAL ESTATE SECTOR IN INDIA

INFLATION: Increase in price level of goods and services, as there is less money circulated in the economy.

REAL ESTATE: property consisting of land and buildings along with natural resources such as crops, minerals, immovable property.

INFLATION Inflation can be explained as constant increase in the level of prices for goods and services. Alternatively, it can also be explained as reduced purchasing power .There are different studies which can be classified as QUANTITY THEORIES OF INFLATION AND QUALITY THEORIES OF INFLATION. The quality theory is worked upon money equation, whereas quality theory is worked upon by sentiments and expectations of people.

There are several Inflation variants: Deflation is when the general level of prices are falling. This is the opposite of inflation. Hyperinflation is unusually rapid inflation. Inflation taking place in Geometric Progressions is termed as hyperinflation. Stagflation is when there is unemployment with economy on a standstill..

Categories of InflationIn Keynesian economics there are two basic types of Inflation:Demand-Pull Inflation Cost-Push InflationDEMAND-PULL INFLATION:Demand-Pull Inflation deals with the idea that the demand for goods and services in an economy is more than the supply, this excess demand pushes up the prices until equilibrium is attained at a higher price level. So, inflation over here is demand-driven. Government expenditure, increase in supply of money and increase in the price level in are the three primary factors that cause the aggregate demand to go up.COST-PULL INFLATION: Cost-Push Inflation results from decline in aggregate supply. Rise in prices of raw materials and wage rates are the two major factors behind the Cost-Push Inflation. However, it may even result from the increase in prices of any of the factors like land, labor, capital and organizations that are known as factors of production. When there is an increase in the cost of production or operation, profit margin of the entrepreneurs decreases. The increased costs are transferred to the customers in form of higher prices. This results in Cost-Push Inflation.

Effect of inflation on real estate sector1. Prices of raw materials shoot

2.Borrowing costs increases

3.Impact on CORE INDUSTRY

4.Scope of infrastructural

development takes a dip

TREND ANALYSIS OF INFLATION RATE WHICH PREVAILED IN DIFFERENT MONTHS FROM 2009-2012 IN INDIA.

DLF vs. INFLATIONLand Is a scarce resource and the seekers are more, hence rise in prices of real estate establishment is justified. But when price rises due to factors other than the normal factors, then they are termed as abnormal factors or abnormal forces and INFLATION and HIGH BORROWING COSTS are the main culprits of downfall of REAL ESTATE SECTOR in IndiaQUANTITATIVE FACTS The net profit of Delhi Land & Finances, India’s largest Real Estate Company dropped down to 18 percent to Rs 292 crore for the quarter ended June, compared with Rs 358 crore for the corresponding period last year. This was primarily due to high cost of borrowing/financing and high Inflation.Quarter ended March, DLF’s net profit stood at 212 crore.Net sales dropped by 10 percent to Rs 2197 crore compared with Rs 2447 crore a 2 year ago period.

The sentiment prevailed in entire Real Estate industry as price levels jumped up so high that people opted to save than to spend; also the core industry was impacted which comprises of steel, cement, oil as the prices of cement and steel increased cost of real estate establishments also increased hence there was double push in the costs of the real estate property

SLUMP – PRODUCTION SLOWS DOWN DUE TO REDUCTION IN DEMANDRECESSION – PERIOD WHERE ECONOMY SLOWS DOWN AND UNEMPLOYMENT INCREASES.FIRMS LOSE CONFIDENCE AND PLOUGH BACK THE MONEYRECOVERY- PERIOD WHERE ECONOMY MOVES BETWEEN RECESSION AND BOOMBOOM – PERIOD OF PAST ECONOMIC GROWTH

TRADE CYCLES

MILLION DOLLAR QUESTION … ????

CAN INDIA PUSH FOR GROWTH INSPITE OF RISING INFLATION WITH RESPECT TO REAL ESTATE SECTOR?

YES!Following are the reasons in the support 1.ECONOMIC SURVEY REPORT 2011 – 12 2.ECONOMIC REFORMS BY GOI 3.ROLE OF FOREIGN DIRECT INVESTMENT AND FOREIGN INSTITUTIONAL INVESTMENT 4.MONETARY POLICY OF RBI 5.CORE INDUSTRIES PEGGING UP 6.TRADE CYCLE IS NOT STATIC,BUT DYNAMIC