How Elections Impact Real Estate Markets

The process through which a common man selects his representative in a democracy, known as elections, has a wide impact on the economy, especially on real estate market. In a country as big as India where state elections follow different timelines, the impact is even more prominent and is often constant. The real estate sector undergoes several changes before and after the elections in a state.   

Before…

Before elections take place, potential homebuyers adopt a wait- and-watch approach because of their expectations from the new government. The new government may bring new schemes, offers and policies which may or may not be conducive for investments. For developers, the situation remains similar, only the stakes go higher. In such a scenario, they prefer to sell their existing stock rather than launch new projects.  Data show new project launches during India's general elections in 2014 reduced. Though this remains the best time for homebuyers to buy a property as they can do some hard bargaining, buyers still prefer to stick to the fence while waiting for better policy regime.

…and after

Real estate experts are of the view that property prices rise after elections. However, this could be more of a belief than a fact. Election results do not affect the real estate market as such; they impact the sentiments of homebuyers and investors. For states, where the anti-incumbency is leading the elections, change in the ruling faces brings more confidence among homebuyers and investors as they expect the road to recovery will now be smooth and unhindered. For those states where the ruling government is going to repeat its term, investors get more aggressive as the risk appetite is higher due to strong economic growth.

Another aspect of the elections' impact on property market can be seen when infrastructure projects started by a previous government are shelved or stalled by the incoming party.

Government projects that are initiated right before the election season often bear the brunt of a change of guard. The Jewar Airport can be cited as an example here.

Plans to build a second airport in the national capital region were first conceived in 2001, but with a change in governments at the state level and also at the Centre, the project was shelved and revived multiple times, causing much jitters to investors.