said a senior government employee I recently met, over his cigarette session. His concern was that the only reason he is investing his well earned money in real estate is india main "land he nai hai." Sir, I have travelled enormously and not just that to see land you need not go anywhere, but just travel NH8 from delhi to Bhiwadi. One may say "gurgaon mai to bahut development hai", but what one may not notice there are vast stretches of land still undeveloped in Gurgaon. You climb 20 storeys in Gurgaon (not sure whether there is still a 20 storey structure here) and you would see vast tracts of empty and mostly barren land.
The comment should be, "Indian mai land to bahut hai, but infrastructure nai hai." Still it doesnt justify why real estate prices should just be northbound. This logic defies every wise logic :-). No need to look beyond, but just need to try and understand how much of real estate that is worth living is in the reach of a 10 lac salary employee. Hardly any!!. Now contrary to many perceptions, I have seen bloated packages, 10 lacs still remains a very dear number for many many many. Most of the times 10 lacs is breached as a couple.
One needs to understand, "real estate kahi bhage nai ja rahee hai". But why, simply because there is ample supply in most cities, most real estate is unaffordable. So as a migrant I can't really afford one, so better not migrate. Just because India is a demographic story, migrant story doesnt mean, the flush of migrants can latch upto any price point of real estate as an owner/tenant. I am currently staying in Gurgaon, somehow, suppose I cant afford the place today I would shift to Ghaziabad, where similar space is damn cheap. Yep, it comes with other tags but then, money is money and savings is savings. See it is very simple, for every dime spent on something, savings pool dips. And India is also a savings lend growth story. If all savings moves to real estate company or an owner, it further gets invested in real estate (lets assume), therefore the prices move up even higher. May be to the extent where many such companies or owners can't afford it either.
On the top of it, just the food inflation is eating into small pockets of middle/lower class. If they tend to spend more and more on food, the money from cities may end up moving to villages (this is not the case though most of the times, cause there is a horde of middlemen). Still this trade doesnt attract much income taxes, so at least it doesnt positively affect fiscal deficit directly. High real estate costs also result in higher restaurant bills, and movie costs etc etc. So ultimately what I wish to conclude is real estate is just another commodity, and one which has minimal entry and exit costs for development company. But for land reforms, and intersection of the landlord/developers with local authorities, the business is relatively easy to do. Unlike heavy industry, the supply in real estate can be managed much easily. Therefore, spend when you feel you can really spend, not otherwise.
I have realised over years, you are better off as a tenant and can own up great quality houses yet not spend exorbitantly out of pocket to own one. Pricing definitely is likely to even out, I dont see that day very far with extensive pressure on industry, regulations arriving in, more infrastructure being created, newer cities opening up.....because if all this doesnt happen there is not point in the India growing as well.
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