[A M]

Demand and supply economics applies here too.
With increasing population, demand for space increases but supply is limited = price rise.

Employment opportunities are in cities --> shift of semi-urban population to cities --> increased demand for space --> price rise.

In Chandigarh, a 250 sq yard plot is upwards of Rs. 2 crore while for the same amount you can buy more than 2 hectares of land in a village 100 km away.
Reason- No economic activity in that area --> no employment opportunities --> people shifting to cities --> demand for space in cities --> price rise.

So, bubble or not, future of realty, as an investor, is good. Population keeps rising but the size of the country will remain the same if not decreasing(PoK gone, Aksai Chin gone, Dragon laying its claims on Arunachal and the recent border dispute resolved with Bangladesh, a lot of land was given away while lakhs of refugees accepted and issued adhar cards).

Oh.. Didn't notice when did I start ranting.

[Turbo_Charger]

Most of you have already told the real reason why Property Prices are not going down so won't delve on that, but my point there's a limit and after that the bubble will eventually burst. My hunch is that the D-Day will come after 2014 elections (or whenever elections happen). I visit many townships/apartments in NCR region daily and on an average only 40% flats are occupied in "old" buildings (around 5-6 years old) and 20-25% are occupied in relatively new ones.

On top of it all, I see many under construction buildings and I just can't help but ask myself, where are the people who can afford to live in so many expensive flats ? On an average a decent flat costs around 1-1.25 Crores and when you see Towers after Towers being built you just question the viability of it all considering the prevalent poverty in our country, a country in which 70% of the population is extremely poor.

Coming to the Under Construction part, many ongoing projects are Delayed. The reason being that no one's buying. The Developers are not paying the Contractors or they have a few men working on the site to show some activity is going on, to avoid the spookiness of an abandoned project. No one's buying because the prices have reached the sky. There's a limit to what everyone can pay for a flat, the builders and brokers can keep on increasing the prices but there won't be any buyers. The brokers and builders have a cartel and work hand in glove to appreciate the prices but it's the buyers who are to be blamed for accepting whatever is thrown at them.

I have personally asked a broker about a flat costing 1.2 Cr. The broker has already paid 40L to developer and is now asking me to pay 80L to broker and 80L to the developer. So the total is 1.6 Cr and the broker earns a cool 100% profit on his investment of 40L. He told me this is the premium, on a project which has been delayed endlessly and is yet to have the structure completed. Needless to say, I told him to take a hike.

I know people who have booked flats in a project without seeing the approvals, floor plans, show flats or anything. They went, saw the barren land and paid the booking amount and got a flat. Even excavation of land hasn't begun yet. All in the hopes of the "returns" that Property/Realty pays. We are ultimately a herd-country. Some people have earned money in Property & Stock Trading and the next instant all his known associates will follow in his footsteps to try to emulate his success.

Just like the Dot Com Bubble, this too will also eventually burst and I am waiting for that time.

[masin4]

Another interesting aspect of the black money angle be it cars or real estate is the recent comment by the FM on 40,000 people with a declared income of above 1CR in India.If one were to extrapolate that to the number of premium cars and apartments sold will show the role of black money in the Indian economy.

With yesterdays expose by Cobrapost on how the banking system was also helping in converting black to white, a lot of black money that could have moved to the banking sector will again come back to real estate letting the bubble sustain.

[noopster]

Originally Posted by GTO

A property is an investment. A car is an expense.

Even a reasonable property appreciates with time. However good the car, it will only depreciate.

Not debating anything you have said here but the fact is cost of living is going up by 5-10% a year, wages are mostly keeping pace with that, most consumer goods are actually cheaper in real terms than 10 or even 20 years ago, so why the galloping prices of real estate?

In Pune, realty prices have nearly doubled in the last 3 years. This is not very different from Mumbai say 10 years ago or any major city for that matter. It has to be more than simple supply-demand dynamics at work.

Tanveer's explanation rings true. The only problem is I have been hearing about the bubble bursting for many many years now and it hasn't happened yet. Not even during the worst recession ever in modern times. So I'm skeptical!

[deehunk]

The migrants contribution is one of the reason here, see all cities like Pune, Bangalore, Mumbai, Chennai has a large number of migrant population. These people are easy prey for cheaters, I would like to share my own experience in a Bangalore rural area, 3 years ago most of the houses in Surya city were vacant and the rent for a good 2 BHK was INR 3000/-, then people who work close to Electronic city started pouring in but the middlemen took advantage of this and started escalating the rentals again because most of the house owners were not staying in Bangalore. The tankers used to supply water at INR 150-200, but with more migrants pouring in now it has gone upto INR 400, similarly autowallas who had to wait desperately for passengers 3 years ago now make quick bucks for dropping people to places like Narayana Hrudayalaya, Chandapura circle for 100 bucks(only 2-3km distance). Imagine a middlemen who himself is an outsider holding the keys of all vacant flats and houses in Surya City and doing a flourishing buisness of brokerage, the Government authorities have turned a blind eye to this menace. Do not jump into conclusion and fall prey to such people, consult somebody who can tell the real facts and then decide to buy a property, else they will milch money from soft targets.

[sunishsamuel]

Looks this year hikes were not good for many, so car sales are falling. People are not looking at upgrades or buy new ones. People might be looking for used cars instead !

Its not just the people in India who jacked up the prices of real estate, few working abroad invested their hard earned money in every possible property at the asking price. I guess that added some spice to the "high demand" scenario. I am not sure if any of the buyers who in the average age of 30-35 think about what would happen in future. 20-30 years later, most of the apartment complexes would have to be demolished for safety reasons or would collapse. Water is not available anywhere. The climate is impacted with places like Bangalore becoming like a hot oven. After 30 years most of us would reach the retirement age, with hospital bills, childrens education, marriage and what not, would people be able to afford a new house then ? Essentially the investment now would be a burden then, would it not ?

But who cares, my neighbour bought a flat for Rs. 10L and he sold it after two years for Rs. 30L. Wow, let me also buy one (or may be two) right away and sell it after two years and make money Real estate and not real prices !