is Indian real estate a bubble?

[^_^ 5,021]

or, as my cousins and real estate agents in India like to tell me... these prices will only go up?

which is true?

I have a hard time believing that the incredible run up in housing costs in Indian metros in the last five years is anything but a bubble.

but I'd like to hear your thoughts.

[ELW 5]

When I hear about the outrageous home prices in India metros now, I am totally shocked! It will definitely go the way of USA, but it may take a bit more time. Salaries are also going up a lot, remember.

[^_^ 5,021]

Salaries are also going up a lot, remember.

Good point.

Also, in the metros, I suspect NRI demand is providing a 'floor' to prices.

[Harsh_77 718]

Its not bubble, its simple economy availability vs demand. Demand is very high and shortage of the place so the price will keep on going.

In suburb of Mumbai right now a 2 bedroom appt approx 800-820sqft goes for approx $450,000.00

A parking spot in the appt complex Rs.10 lacs

[^_^ 5,021]

Its not bubble, its simple economy availability vs demand. Demand is very high and shortage of the place so the price will keep on going.

In suburb of Mumbai right now a 2 bedroom appt approx 800-820sqft goes for approx $450,000.00

A parking spot in the appt complex Rs.10 lacs

Why is there suddenly (over the last 5 years) a shortage of space? Has the population suddenly skyrocketed?

[trinket 30]

Why is there suddenly (over the last 5 years) a shortage of space? Has the population suddenly skyrocketed?

Nope I think its because new generation don't live with their parents anymore, more and more young couples are looking forward to live separately.

[^_^ 5,021]

Nope I think its because new generation don't live with their parents anymore, more and more young couples are looking forward to live separately.

hmmmm. Interesting.

Do you think that alone accounts for the huge % increase in price over the last few years? To what extent do you think this increase is based on the kind of fundamentals you're referring to (which I tend to think you're right about) and to what extent is it a result of speculative activity?

[Harsh_77 718]

One of the main reasons like mentioned earlier, now days families are moving from joint family to more of a nuclear family.

Secondly the younger generation has much more access to funding, which was not the case in older times.

Now the younger generation is able to get a loan from banks, same as American way and get an apartment on installments. (so naturally the demand for the apartments have gone up)

Also now with all the industries booming lot of people have extra money and what could be better investment, definitely property for which the prices are sky rocketing. (again increase in demand)

So will all these increase in demand and limited supply as cities like Mumbai don’t have room to grow horizontally and even vertically it is limited by govt. regulations. (creating a shortage)

Shortage in supply and heavy demand = rise in prices.

[ELW 5]

Best answer, Harsh_77 - you covered it all perfectly!

[Amit-N-Melody 11]

One of the main reasons like mentioned earlier, now days families are moving from joint family to more of a nuclear family.

Secondly the younger generation has much more access to funding, which was not the case in older times.

Now the younger generation is able to get a loan from banks, same as American way and get an apartment on installments. (so naturally the demand for the apartments have gone up)

Also now with all the industries booming lot of people have extra money and what could be better investment, definitely property for which the prices are sky rocketing. (again increase in demand)

So will all these increase in demand and limited supply as cities like Mumbai don’t have room to grow horizontally and even vertically it is limited by govt. regulations. (creating a shortage)

Shortage in supply and heavy demand = rise in prices.

[trinket 30]

I think we should have a thread about investing in India for NRIs. If you guys agree to that. Everyone can pitch in and some useful ideas.

[trinket 30]

hmmmm. Interesting.

Do you think that alone accounts for the huge % increase in price over the last few years? To what extent do you think this increase is based on the kind of fundamentals you're referring to (which I tend to think you're right about) and to what extent is it a result of speculative activity?

As Harsh pointed out people have more money today than they had even 15 years ago. Most Indians would have never thought about loans. I was having a discussion with my dad the other day about mortgage in US and he made a valid point about how in his days getting a loan for housing was impossible.

I was looking through housing loans in India and its still is higher compared to US market, but more and more of young generation is getting their way to buy a house. What used to happen a couple of decades ago was a government servant or even private one would work all their life and then with their retirement money at the age of 60 would buy a house, his kids would end up inheriting that house and thats how the cycle would turn over and over.

Also keep in point with the young couples both man and woman are working and bringing home the money, so couples have more money to invest, they aren't relying on only one income.

[^_^ 5,021]

Ok, so you clearly don't believe it's a bubble. Fair enough.

[Harsh_77 718]

This is not a bubble, but just keep in mind lot this is only applicable to metro cities in India. If you move away from metro then the prices of real estate is not that bad and they dont appreciate that fast either, but also they come with problems like electricity and water problems and on.

[ELW 5]

Doesn't Delhi have major water issues? I have friends there and they need ALL their water tanked in daily! I would think in such areas, the bubble would pop.