Well one swallow does not a summer make…nor am I sure about this being a trend…however here it is.

Real estate prices in Mumbai have (had) grown far beyond the typical working class person. So much so that real estate replacement price and not the product determines the final selling prices. So if you have a restaurant in Nariman Point (STATUS) your pricing was a function of the real estate price there. It did not matter how good or bad the food was (sorry Mr. Kamath, but the food continues to be excellent – this was just an example, I ate there last week and am a very happy customer of yours…and have been since 1985 in your various other restaurants too).

Similarly if a 3 BHK sells in Malad for Rs. 4.5 crores – what do you tell a fresh MBA from Allahabad trying to make a career in Mumbai? ‘Ok girl do not worry if your salary does not go up …in about 200 years you will be able to own the house without any loan outstanding?’ Sounds ridiculous.

So when you see such a news item you wonder whether it is a simple story or the beginning of a trend…


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  1. Subra,

    People are moving to Pune from Mumbai which is making the real estate in pune unaffordable since years now.

  2. Hi Subra,

    I wont comment on commercial real estate but for residential part so many people are waiting on the fence, so if there is small dip in prices these people will jump in which will again push the prices up

  3. A friend of ours from U.S. came to visit us last Sunday. She is planning to settle back in Chennai along with her family. She and few other NRIs are of the firm opinion the housing prices in India are set to correct.

    When we purchased our flat seven years ago, the price in Adyar was around Rs.2300/- per sq.feet. Now it is hovering around Rs.14,000 per Sq.feet. The irony is that the demand is very high and there are more buyers and very less sellers.

    Is their anyway real estate prices across India would correct, which in my opinion is necessary and healthy.

  4. I too met a friend’s husband who just moved to Chennai and was shocked at the real estate prices VIS A VI Hyderabad! He would have to sell his huge flat and huge independent house to procure a small 2 bedroom flat in Chennai. So the couple decides to move into IIT campus – where my friend has become a lecturer!

    About price rise – im Mumbai – I know for sure – good part of the money goes in bribes, bribing the authorities for various permisssion, to the local political goon and of course bribing the sundry!

  5. 1) People are more greedy now. Most of us are booking their 2nd flat not as a necessity but as investment.
    2) More & more people are working class and the city constarint are around top 10 cities, so the prices are increasing. and same people are agian purchasing the 2nd/3rd flat in their home town tier2/3 cities which again increasing the real estate price of these cities.

    we may see a small correction but for a long term (5-10 yr) the price will increase the atleast 2-3 fold. Unless and until govertnment strong intervention/regulation in these sector

  6. Hi subra,
    This is aside from your post.Just want some info.Informed readers of your blog please help.My sister a NRI purchased a flat in OMR,chennai from a very reputed builder from MUmbai.
    1. He has been delaying the project for more than a year than agreed and refuses to pay even the paltry compensation of 2.50 per squarefeet quoting “force majure” (recession) as an excuse.
    2.Besides he also wants the buyer’s to pay another Rs.80,000 for FTTH which was not agreed upon in the first place.
    Can the builders legally do such things?
    If not what recourse does the buyer have? The builder is not a member of CREDAI so that option is ruled out.Your valuable suggestions are awaited.

  7. FTTH is Fibre to home a new technology.Useful, but not for people who want to let out their property till they relocate.

  8. the only solution against a bad manufacturer is going on the net and creating pressure. Credai or no credai no builder has behaved well when the prices are down. The customers of Hiranandani also had to do all this to get some justice so just follow them. Trustworthy builders is an oxymoron.

  9. Well Subra,
    You hit the nail on the head.The very same builder in chennai.Unfortunate that he had to be pressured in Mumbai.Didn’t know about that.Trying to get the buyers to come together on this issue.Many thanks for your prompt response to an unknown reader of your blog.Thanks once once again.

  10. Let me put it this way. Real estate accounts for most of our savings. If even half of it goes to stock-market (spread over a decade) then you will see stock prices also sky-rocketing.

    It is about mentality of indian investor — where they want to put their hard-earned money. Once it changes, real estate prices will also correct.

  11. prices may be falling -but for the wrong reasons.it is not as if demand has abated .it is govt “clampdown” or price controls which is causing this. i’d love to know/read statistics of how much leveraged the median indian buyer is . if it is overleveraged like US,then we are in trouble.otherwise it proves nothing.
    india still remains higly underdeveloped real estate wise on an overall basis.certain pockets of mumbai notwithstanding

  12. real estate does not account for most of our savings – it is cash and gold which take the cake. Then there is bank Fd, post office, lic policies, …DEBT…if Indians demanded better return on their investments, there is some chance….:-)

  13. I see that for people who are owning a house, real estate is the significant asset. Though self occupied house is not an asset (unless you choose to sell it and redeploy the money), people consider it otherwise. If you remove self occupied house and jewellery from a family, even debt like FD or Post office forms a very insignificant portion of their networth.

    Equity – What is that!

  14. In India there is a direct link to real estate prices and black money.If we are able to curtail or control the black money & corruption the real estate prices also will automatically come down

  15. Well, one possible solution is to try and develop a regulated market for leasing including serviced apartments.
    If it becomes easier to rent across cities the incentive to buy would be mitigated to some extent.
    Recently saw a Knight Frank ad asking people if they wanted to rent their house. Hopefully it will bring a slightly more organised process.

  16. well Suresh it is funny. Hotel rates in Mumbai are sky high and many houses are empty – because they are afraid that the tenant will not vacate. So logically they should give it to people for a week or a night..and make some money. Correct? Logical.

    Here comes our friend’s ex boss’s brilliance. To keep prices high, he brings a rule…that ONLY if ALL the houses in a building decide to become a service apartment….it can happen. LOL. conversion rate? NIL. Ayn Rand zindabad. amazing manipulators. Imagine what happens to their balance sheet if prices fell say 40%? Hmmm I am a shareholder and not cribbing.

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