the biker who buys houses forum

[JaamiScott]

The slowdown and cooling off of the Real Estate Market in India has led to the fears of the property bubble. Behavioral finance has repeatedly proved that whenever asset prices start escalating, the initial interpretation has been that of a bubble. But with land always being a scarce resource, property prices follow the basic economic of demand –supply and pricing, whereby property prices seem to have increased. Also if we analyze price trends in the last decade, we have seen stagnancy since 1997-2002. Normally real estate returns are in line with inflation and we have to look at the current price rise, factoring in inflation during the stagnancy period.
Property market is not homogeneous. Some parts are overheated while others not peaked. Prices will plateau in overpriced markets while other markets will be unaffected. Otherwise also there is nothing to worry as long as residential and commercial sector is demand driven.
The unreasonable asset inflation in some parts of the country, one could to that extent say that there’s bubble. But there is no problem since wage increases have outs tripped rates hikes and buyer has holding power and large part of real estate is self occupied. However we need to look at the possibility of a land bank bubble. The run upto property prices is largely due to appreciation in land prices in most of the major cities. A trend that is definitely unhealthy for the market.
Any chances of a bubble in Indian property market adding that slowdown is always a healthy sign. It brings stability and constantness. But India should take a lesson from China, which faces the problem of property bubble. In order to avoid bubble, Indian government should bring in more transparency into real estate through regulatory mechanism and specially form a long term and transparent FDI, Policy

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