The article sheds some light on the prevailing real estate scene. But who is to blame for the affordability? The banks or the realtors? Mr Parikh says that affordability is decreasing due to high real estate prices. But, the rise in interest rate is also a big concern for the common man. The interest rates have grown from 7.5 per cent to about 11 per cent in the last few months. A buyer would think twice before going to a housing finance company. The banks are making huge profit out of this segment. Why can%u2019t they keep the rates at an affordable level, rather than blaming the real estate companies? He even says that the shortage of housing is enormous, so an average 200 basis point hike in interest rate will not affect the demand! Mr Parikh doesn%u2019t want the banks losing the chance of exploiting the hapless buyers. At the same time he is saying the real estate prices should come down! What an idea!
Yes, I fully agree with Mr Deepak Parekh that the real estate in India is over priced. Since I am staying in Mumbai my concern is Mumbai\\\'s Real Estate Price which has never happened in the past, the uptrend is only continuing.
I recall that in the year 1995-96 a similar thing had happened. However, it could not sustain for long. Today there are only investors and actual users are very rare and the price is still holding. There is no sign of cooling down.
Our leaders are merely a spectators for what is happening today.
Our leaders should realise that in India, considering our population, large section of our people are middle class working and they can not afford such escalation. The Govts. slogan of ROTI KAPADA AUR MAKKAN is missing today. Government should ensure that low cost housing in Mumbai to be encouraged. Large section of our people doesn\\\'t require Swimming Pool, Health Club etc. a simple home, as they will not be able to afford the hefty monthly maintenance amount.
It is a fact that only a section of people have benefitted from our economic reforms.
I appreciate this article. The Analysis is correct that Real Estate prices are too inflated in India.
I made some comparison with other developed countries ..
USA - Average home - 200,000 (not in high cost locality) with interest rates below 7% mortgage and can fetch a rent of 1000 to 1200 USD per month
Europe (except UK) - 80000 to 100000 Euro Studio in the capitals like Paris with mortgage interest around 6% will fetch monthly rentals of 800 Euros or more
I bought an apartment of less than 2000 Sq Ft in a metro in India for 45 Lakh rupees (approx 100000 USD).. Mortgage is more than 15% interest rate.. and the rents are well below 20000 rupees per month (500 USD)...
Compare this to the Developing economies like Checkezlovakia .. Prague property prices are doubling in every 5 years and still you can get good rental returns..
I think the property prices / Mortgage interest rates / Rental returns dont match up in India..
We have to be more realistic on Rate of returns.. instead of talking about some future inflated property price return.
I think Deepak Parekh Nailed that correctly in this article.
Plus the congestion in the cities without infrastructure is amazing as I find that we are cheating ourselves .. for a 100000 USD investment in an apartment, I surely want to expect more in terms of the quality of infrastructure.
RE:Good Analysis
by krishnamurthy on Feb 22, 2007 12:01 PM Permalink
THE INTERVIEW IS VERY TIMELY.ANY ASSET BUBBLE IN THE REALESTATE SPACE WILL REVIVE THE MEMORIES OF SOUTH EAST ASEAIAN ECONOMIES OF 1997.
