REALITY AGAIN MAKES CRAZY RISE IN INDIA


It is a fact that we are not When one looks around these days, it appears as if its 2007-2008 all over again. Business activity has picked up. Stock markets are booming and confidence is once again returning. Shockingly, it seems like the gut wrenching crisis that we have had recently never happened. Is it any surprise then that real estate price in India is going back to those heady levels of 2007-08 all over again? As a leading business daily put it aptly, "Welcome back to the era of crazy rise in home prices." There has been a 30% rise in home prices in the last six months with a lot of pent up demand coming into the market around the Diwali season. What is more, most NRIs, who now wield a sizeable clout in big cities like Mumbai and Delhi, have invested in Mumbai this time around than Dubai, further adding to the overall demand.

It should be noted that there is no dearth of demand for good residential projects in the country. The market is significantly underpenetrated. Thus, whenever there is a correction to the tune of 25%-30% and prices become more affordable, buyers queue up to buy. Furthermore, seeing strong demand, real estate speculators and investors jump in and hence, push up prices even further.

What is needed is a strong surge in supply which can only be possible through a structural reform in the industry. Until that happens, a decent house is likely to be out of bounds for an average middle class Indian, especially in the big cities.