Real Estate prices in Mumbai have risen well beyond the peak of 2008, some people who were intelligent enough to buy flats 12-15 months back are sitting on sweet gains. I was talking to my friend, who is an investment banker, and we were discussing whether without the sustained economic growth at fundamental level, Mumbai will be able to maintain the current price levels? Is there be a realty bubble waiting to explode in India, Mumbai? Imagine a flat quoting about 70Lacs just before the crisis in 2008, is now priced at over 1 Cr.
We discussed two points. First, that even at the peak of the crises, the builders were able to manage with minimal sales, though their valuations took a nosedive, but they didn’t went bankrupt, somehow they had the working capital or they managed to get it. So, effectively the supply demand equation does not hold when there is a oversupply. Second, most of the people in India are still buying their first ‘HOME’ and that is not an Investment, it is a basic necessity and they will buy flats as and when prices start falling, even if just by 10%. At least I know 4-5 of my friends who are just waiting for prices to cool a little bit. Contrast this with the develop world where people were living in their home and had 2-3 homes as an investment, they may sell it if they require money or they may not buy another if they don’t have the money, but is it possible in India?
On another note, I don’t understand how government is going to control the food inflation by increasing interest rate. If not, then why the hell they promised 6 months back that inflation is going to come down. Now you see news articles that government has failed on their promise, I say it was never a promise. To control the inflation we need a good agri. production, not just good we need a bumper production. With millions of tonnes of food-grain rotting outside the FCI warehouses, while our agri. minister is juggling between IPL/ICC and asking the prime minister to reduce the burden; only time will tell whether our system can even handle the bumper harvest, if we have it at the first place. Even I think that what Mr. Iyer said about spending 35,000 Cr. for CWG is a waste, not because I second his other opinion of using that money for promoting games in india, but because I think that money should have been spent on setting up new FCI warehouses/upgrading the older ones. Seriously, I don’t mind people bureaucrats gobbling up the same 100 crores while setting up some more warehouses than doing the same while setting up lavish sports complexes. But nothing will happen as the root of the problem remain the same people. The people who still elects these minister; the people who wear branded ties, drives mercedes but still jumps the traffic signal; the people who still do not pay the taxes; the people who still do not cast their vote (but vote their Caste); the people who still spit on the roads; the people who are willing to pay bribe to by-pass the system but not get into the system and clean it; the people who still kills for religion, the people who are we.
The blog has already become so long and I didn’t even start on Double-dip. But let’s just leave it at this.
