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xwhyz

In India, the real estate prices have risen to sky making it unreachable for a normal middle class or upper middle class people. Who could be responsible for such a huge spike in real estate prices. I personally feel that there is a huge mafia (along with politicians) involved in this situation and have made this worse situation. Will it last?

Admin

Its the demand my friend and rising incomes There has been a massive rise in incomes in the last 5 years in India and with that demand goes up which obviously translates into higher prices.

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just4kix

It is due to a lot of factors combined:

a) As Admin said there has been a significant increase in the income levels of the middle class
b) The then Finance Mininister, Yashwant Sinha, increased the limit of tax exemption u/s 24 from 30,000 to 150,000.
c) More and more banks and HFCs started giving loans and interest rates dropped from highs of 16.5% in early 1990s to 7% around 2004 (they increased signifincantly again; but that is another story)
d) The desire to own a property was never so strong.
e) The IT and outsourcing boom created a lot of high income jobs in India.

All the above factors gave rise to a high demand. On the supply side:

a) Land in cities was/is limited.
b) Planners failed to create satellite townships with infrastructure and facilities.
c) Landgrabbers, mafia and politicians cornered most available plots.
d) The Urban Land Ceiling Act (in Maharashtra) did not help at all.
e) Most high-wealth jobs were created in certain pockets only - Bangalore, Gurgaon/Noida, Hyderabad, Chennai, Pune, Kolkatta, etc. Hence there was a disparity and imbalance.

So its a classical Supplu vs Demand situation.

There is plenty of available land in India - SEZs are the right way to go but they need to be implemented properly.

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