The high appreciation rates that India's property market is currently witnessing, is due to the Home Loan Interest Rates reduction that the National Democratic Alliance government instituted after 2001. In early 2004, home loan rates sank to a record low of 7.5 per cent and this paved the way for the alarming spiking that typified the country's property rates in many Indian cities.

The very amenable borrowing rates encouraged individuals to avail of home loans to buy residences, while up to then actual property purchase had only been an option for the considerably rich.This resulted in a huge demand for quality real estate all over the country post 2003. Since March 2005, Indian real estate rates have displayed an unstoppable upward curve. This is directly related to the opening up of foreign direct investment in real estate. The market has been expanding at an unbelievable rate of 100 per cent plus. This can also be traced to the heightened NRI interest in real estate.

Many presently feel that the Indian real estate market is a bubble, and will eventually burst. It is true that residential rates in many Indian cities like Mumbai and Delhi are comparable with property rates in the West now. However, let us take an investor's point of view of this phenomenon. Behavioral finance has repeatedly proved that whenever asset prices start escalating, the initial interpretation has been of a 'bubble'. In-depth analysis of price appreciation in real estate and the reasons thereof would help in comprehending these fears. Price appreciation in real estate is backed by the following fundamentals:

Rising income levels, resulting in increased demand for quality constructions and aspirations for better locations in residences. IT / ITeS continues to be a major revenue driver and rising outsourcing trends have driven demand for office space. Hospitality industry is operating on more than 85 per cent occupancy in major metros and rising business activity is resulting in increased investment in hospitality.

Leading real estate consultancies Jones Lang LaSalle (JLL) and Trammell Crow Meghraj (TCM) announced their merger on Tuesday to form the largest real estate services firm in the country under the name, Jones Lang LaSalle Meghraj. While the market share of the new entity will be 35% (taking into account all property consultants), it would be 50% of the international property consultants sector.

The total real estate under management under JLL Meghraj will be a colossal 44 million sq ft, combining 21 million sq ft of JLL and 23.2 million sq ft of TCM. The combined leasing transactions will now be 22 million sq ft, the project and development services would be more than 21 million sq ft.

“The new entity will offer new services also, like a hotel division, new capital markets as well as asset and shopping center management,” says Anuj Puri, country head, JLL Meghraj. The merger takes place after Meghraj Properties bought back the equity of Trammell Crow and then after contemplating the offers, chose JLL as its partner. Trammell Crow was taken over globally in 2006 by CB Richard Ellis.

“With TCM being a dominant player in the domestic market and JLL having international expertise, the new merged entity will definitely be a force to reckon with in the real estate sector,” says Puri.