sooth_sayer

India's Strong Growth Should Continue

Vikram, It is interesting that you can make a broad statement like "real estate will never go down in India", but when I point out that real estate went down in India in the 90s, you term it "generic". Real estate prices in India have gone up absurdly based on a ponzi scheme. It is completely leveraged, where speculators put down 5-10% down and then flip it over to the next speculator within weeks, if not days. Since money is not borrowed from banks to play this speculative game, perhaps banks are not in that much trouble, but that does not mean that the valuations are not absurd. It also means that very little equity is in these homes, as most people have been just speculating with their down payments.
Let me clarify that there was NEVER a bubble in the USA, and what the media in the USA terms a bubble is basically just a tripling of home prices in TWENTY years in coastal areas. In the rest of the USA, home prices have only DOUBLED in the last TWENTY years. And this very meager appreciation is what they call a bubble, which is utterly ridiculous. The leftist media in the USA wants home prices to stagnate forever. Media in India, on the other hand, is a non-stop hype machine, getting more investors into the ponzi game. Land prices have gone up anywhere from 100 times to a 1000 times in the past 20 years in India, and compare that to 2-3 times in the USA. Even low quality apartments in most Indian towns cost more than even a decent single family home in a corresponding place in the USA. Nothing could be said to justify that, when you compare incomes, infrastructure and quality.