House prices in Mumbai refuse to decline

Niranjan Rajadhyaksha in his superb blog Awkward Corner had pointed the stock market gave more returns than Mumbai real estate during 1979 and 2008. This was an amazing piece of statistic.

However, unlike the equity markets, house prices just refuse to decline. Though, there have been reports over decline in housing prices, it is somehow only on paper. A recent Newsweek story said it is cheaper to buy a flat in Manhattan than Mumbai.

The stock prices of most real estate companies have slumped, but not the prices of the goods they manufacture. If interest rates are rising, we should see a fall in house prices. But there is nothing like that happening.

Talking to various brokers in the city, the prices are still very strong and infact continue to rise. Why should this continue? I had pointed to the presence of endowment effect being present in the housing market. This is just getting stronger as sellers have really high holding capability.

I was reading in one of the papers that Builders actually expect prices to rise further hoping demand increases in festivals. Well, what can you really say?

2 Responses to “House prices in Mumbai refuse to decline”

  1. riathareja Says:

    The Maharashtra government is actively considering charging additional stamp duty on property transactions to raise Rs 350 crore for irrigation projects in the state. Mr. R R Patil, Deputy Chief Minister, said one of the major demands from the elected representatives was that the government should immediately take steps to complete the long-pending irrigation projects in these areas. He added that Rs 350 crore would be raised through additional stamp duty, and other Rs 350 crore through budgetary approval.For more view-

  2. Understanding the surge in housing prices in India « Mostly Economics Says:

    […] has been going on in the housing markets  in India . I have explained in numerous posts (see this) that despite interest rates rise etc, we don’t see any correction in housing markets in […]

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