Are India’s Cities in a Housing Bubble?

This is the title of my new paper. Comments/suggestions are welcome..

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4 Responses to “Are India’s Cities in a Housing Bubble?”

  1. Rakshit Says:

    Good one.
    I feel real estate has become like a bullish stock market , people finding it difficult to resist to stay away from it.
    And like you rightly said, real estate is kind of unreachable to middle class and below and the same is true with real estate of even Tier II cities.

  2. Sachin Says:

    One big factor that drives real estate prices in India is India’s population and even more than that INDIA’S POPULATION DENSITY.

    Indian cities are bursting at the seams. You have compared Indian real estate sector with that in the developing counties, but I think that’s not a fair comparison.

    Developed countries do not face a land scarcity like India does. Even our neighbor China, which is a comparable economy, has much more land per citizen than India.

    There is scarcity of land in urban India, not just for housing, but also for roads and other basic infrastructure.

    Today, most of the low-income and large proportion of middle-income urban citizens want to buy a new home or upgrade to a better home, but can’t because they can’t afford it. This demand for housing is not speculative, it is pure end-user demand. Every time home prices fall a bit, new demand from these aspirants automatically comes to support the prices.

    There is a top-paying group in each category of housing – be it single rooms in chawls or 2BHK flats or row houses or bungalows.

    It is this top paying group that determines where real estate prices go.

    As long as the incomes of these top-paying groups do not fall sharply, there is unlikely to be sharp fall in home prices in India.

    In my opinion, small price corrections will happen to housing prices in India from time to time, but the bubble won’t burst unless the Indian economic bubble bursts too.

    In specific market, bubbles may exist, but these are unlikely to affect the markets in other parts of the county.

    By 2050. India’s urban population would triple. I just can’t imagine what would happen to our cities then.

  3. panks Says:

    Thanks for your research and putting that in an articulate yet simple way.

  4. Sadashiv Kulkarni Says:

    I loved your analysis giving both supporting and opposing evidence for bubble theory. Just adding my 2 cents here. I strongly feel that housing prices in India are in a state of bubble. Primary reasons are following – prices are moving way faster than the GDP, if prosperity is driving the prices. Second, the mass psycology is driving many real estate purchases. Few people are thinking whether a particular amount is worth for a house in a certain area.People just buy out of fear that they will be left behind if they dont buy soon enough. Lastly, if we see a graph of prices in mumbai it takes off like a rocket. As Roberth Schiller explains in his book, supply side takes over in a few years and causes a downturn in the prices. I expect that in a few years there will be excess supply of houses in India and it will cause a severe correction and may be a downturn.

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