“Data shows that the first claim upon the savings of households is physical assets such as gold and real estate.”
That Indians love their ‘real estate’ would be like stating the obvious. But sometimes it is necessary to state the obvious as well. Why? That will soon become clear.
AkhileshTilotia, a thematic research analyst with the institutional equities arm of the Kotak Mahindra Group, makes a very interesting point in his new book The Making of India—Gamechanging Transitions. As he writes: “Thanks to its love for real estate investments, India is in a curious position of having more houses than it has households.”
This becomes clear from the Census 2011 data. “India’s households increased by 60 million to 247 million from 187 million between 2001-2011. Reflecting India’s higher ‘physical’ savings, the number of houses went up by 81 million to 331 million from 250 million. The urban increases is telling: 38 million new houses for 24 million new households,” writes Tilotia.

So what is happening here? One explanation for the number of houses rising faster than the number of households may lie in the fact that houses are being bought as investment and not to be lived in.”

This is a quote from Vivek Kaul…in one of his articles.

One conclusion that people draw from all the Indian statistics is : a) people buy houses in India for speculation / investments MORE than buying for staying in and b) there is a lot of black money in RE markets.

ASSUMING THIS TO BE TRUE….This means 2 things: a) more houses are being created than what can be consumed and b) black money uses this as a safe haven and NOT AS AN investment. That means the black money is expecting only about 6% return – value preservation by getting a real return…

Both of these SHOULD mean that if this is true, RE prices should be down, not up.

People expect say 12% p.a. return on white money and about 6% return on B money. Also in case of B money many people are happy to take it off their backs – for almost a NIL kinda return. So a big builder can get it at a very low rate from a bureaucrat who just does not want to keep it with himself.

Not sure..what to say….

 

 

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  1. What are your views on the current real estate market? Do you think it can see a correction anytime soon?

    I am waiting for the budget as banks are expected to lower their lending rates from what I have been reading so far but would that mean that the rates won’t be affected?

  2. really, data can be used to prove almost anything. we conveniently peddle data of houses going from 25cr to 33cr, forgetting that a closer look reveals that even in 2001, the ratio was 1.33 (1.33 house for every household). Somehow, when i look at rising prosperity, increasing urbanisation expected to take 300mn people to the cities in next 30 years, doubling the urban population, increased thrust on building better, bigger cities, icant reconcile to the fact of a long bearish real estate market.

  3. One of the main reasons we had to look out is MIGRATION. I live in a tier 2 city and I am seeing a lot people coming from nearby towns & villages and settling here for their CHILDREN SCHOOLING. & I see a lot of people from my town moving to cities in search of JOBS, BETTER EDUCATION. So as long as this migration reduces If the appreciation but I don’t think there will be a correction in RE

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