In the 1960s if you wanted to buy a house, it was considered almost impossible to get a home loan. It was only in 1980 that Hdfc started giving home loans – and that too sensible amounts. That explains why Hdfc is so popular – people love the guys who gave them the HOME. Especially the first home.
However, reflect a little and you keep wondering how much is a problem, and how much is a solution is difficult to fathom. State Bank of India recently announced a home loan book of Rs. 100,000 crore. If that is the size of SBI’s share, then the whole market should be about Rs. 250,000 crore. This is not a small market by any stretch of imagination.
This should normally have created a big booming housing market all over the country….right?
It has not created supply. It has created a skewed market where you have the bigger cities on one side with very high prices. It has also not increased supply of housing in the smaller towns or even in the bigger towns.
Is there a solution to this? No. Not really.
Ownership is still cherished – so people will buy beyond their ability to buy and keep driving the prices up.
Surprising that big infrastructure companies have not thought of colonies on rent. Imagine a big company sets up a factory or an office 100 kms away from Ahmedabad. If L&T decides to buy about 400 acres of land and decides to construct houses – 1, 2, 3, 4 bhks – and gives it on rent to the people coming there, there will be no need for the employees to buy a house.
So slowly a guy goes from a 1 bhk to a 2 bhk on getting married, and eventually to a 4 bhk when his needs are at its peak.
Why does this not happen? Because funding is difficult to get for such a project. It is a project with an excellent IRR (remember there are enough people saying real estate prices cannot fall??).
How will the prices in the cities come down? Simply by improving the taxation system. If the richer areas with bigger flats started paying for everything on a cost plus basis, people will not want to buy in those locations. We have a very regressive tax system. The rich man gets subsidised water for washing his car!!
Put a ‘luxury tax’ – on the property tax for properties above say Rs. 2 crores, and you will see prices arbitraging. …..hmmm…
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