A call for government action

Dear Sir,

Your articles on Indian real estate were quite insightful (IBLJ volume I issue 9).

It’s true that Indian real estate has undergone a revolution, attracting domestic as well as foreign investors. This growth is being driven by India’s booming economy, a liberalized foreign direct investment regime and rising income levels of a growing middle class.The 2001 Census of India indicated that 41% of the population will live in urban areas by 2011. This will maintain the growth of the housing sector and other real estate components.

There are, however, some indicators that suggest a bubble. Unreasonably inflated real estate prices, higher vacancy rates in residential and commercial projects, undue delay in the completion of projects and the withdrawal of both domestic and international investors may suggest this.
Recent times also saw a fall in prices. However, a 10-15% correction in prices, a few vacant spaces and a little slowdown in the economy does not necessarily indicate a bubble. With families getting smaller and pay cheques getting bigger, people have become more willing to borrow money to invest in real estate.