Real Estate is coming with a bang again . Unitech , DLF and others are announcing new projects , stock prices are up by 400% in matter of 8 months. Is it all bubble or some reality behind it ? I think whenever stock market went too high too quick there is always a bubble created. It's not just in India ..same happened in Unites states during dot com and then in realty. We are human after all and human are greedy animals are not . Fed played a key role in US now Indian govt also playing something similar buy letting these realtors cook their books and fool the street.
While realters are playing music of affordability in reality they are still keeping same prices per sq ft but lowering size of apartments.
The real estate time bomb set to explode in early 2010 or
2011. Here are reasons..
1. Over Construction : It's visible everywhere across India. With some accounting tricks real estate majors are showing their undergoing projects as revenue and hence starting more projects.
But never forget the basic principle of all economy rule of demand and supply. Oversupply is visible and its a matter of time when this roof will fall.
2. Affordability : Even in small towns in India with
less job prospects or reliable future tax stream real estate prices are
lot higher than thriving American cities.
How can a Banker earning Rs 30000 per month can afford apartment worth 50 lakhs with monthly payment exceeding 60000/month.
3. Inflation : India is prone to big inflationaty pressure. Cost of food is big expense for Indian families and sugar and other commodity shooting up taking 20-30% of their income with it.
4. Interest Rate: Rates are at all time low, and there are more chances that RBI will push it up to control inflation. That means more monthly payments.