The Indian Property Market is purported to be in bubble territory since March 2005, when the current UPA
government decided to liberalize foreign direct investment norms in
real estate on Feb 26, 2005, introduced the SEZ Act in 2005, and allowed
private equity funds into real estate.
Other key factors that
contributed to this tremendous growth were ‘lower price’ which attracted
buyers and investors not only from India but NRIs & Foreign funds
also deployed money into Indian real estate market.
These new rules
ensured that Indian money stacked in Switzerland and other tax havens
can be brought back to invest in high yielding Indian property market,
away from low-yielding dollar assets.
This price increase is mostly due to two reason – one primarily in most
cases the developers create false claims of overbooking and increase
the demand and price and the other reason most of time properties are
bought sold within 6–12 months from one buyer to other. There is no
system available to the public to track these sells or buys. In US there
are lot of real estate website provide the details buy and sell
details, what is fair value, when the house was built, how many houses
are on sale,etc...
The other factor to consider is cost-to-facility ratio, in Mumbai a 2
bedroom apartment with living space of 1,200 square feet (110 m2) or 1,400 square feet (130 m2)
of build up area will cost about 60 Lakhs to 1 Crore or even more, same
for other major Indian cities Chennai, Bengaluru, Hyderabad, Pune,
Gurgaon,etc..
Where as in US, Australia, UK or France a 3 bedroom/2.5
bath townhouse which is at least 2,000 square feet (190 m2)
around most of metros( other than Manhattan and Los Angeles ) will cost
between 250,000 USD to 500,000USD which is between 1 Crore to 2 Crore
Rs.These houses have parking garage, back yard and with basic Kitchen
setup including cabinets, refrigerators, washer and dryer and for higher
range may include a private swim pool, basement, front yard.
In these
western countries average salaries are almost 8 times the Indian
salaries but cost of house(For a much better house) is only double.
Also, compare what you get for your money in Europe or United states
with the situation in Indian cities as evidenced by perusing the real
estate advertisements. Phrases like "ample water supply" " well
ventilated" " with backup generators for power supply" are littered in
almost all of these ads. Bottom line is you get basic amenities that are
taken for granted in the west for a premium price. Also the Interest
rate paid by Indians is almost double that of there developed country
pears makes the EMI paid on par with developed countries in many cases.
Posts
6 comments:
but coming to those standard would take another decade for India. And by that time the rate will overshoot american property. The real root cause is the way black money is handled in property and gold.
For SUNIL dhawan
Property is bubble but as the price are going up and the 98% property are on bank funding this can be dangerous to our economy bank.
As people don;t remember the US and Japan housing bubble. Once the cycle of default start and the property inventories will stay always that might lead to bubble bust in india. This might take time of around more 3-4 yr .but bust is invetiable
JIGAR DATTANI
For SUNIL dhawan
Property is bubble but as the price are going up and the 98% property are on bank funding this can be dangerous to our economy bank.
As people don;t remember the US and Japan housing bubble. Once the cycle of default start and the property inventories will stay always that might lead to bubble bust in india. This might take time of around more 3-4 yr .but bust is invetiable
JIGAR DATTANI
I agree completely. The problem with Indian household is they have family pressure in buying a OWN house or flat. In GGN itself (Urban slum: No Water, Electricity or transport and city turns into a big sewer with little showers)the rates are appreciating more than 25% annually for last 3 years atleast. With average salary in corporates of Rs 7-8 lacs how can people buy Rs 70-80 lacs property appreciating by 25% per annum. It will be interesting to see how many people wearing undies when tide goes down, hopefully sooner than later.
Nice information...Thanks for sharing it..
Hi Dhawan Sir
Waiting For Your Input & Update On NIFTY & BSE
Also Waiting For LAST Pick Or Stock To Look For Next One Year So
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