Real Estate, property, realty … everybody worth his wallet seems to be in the sector. Even as the shroud of recession showing no signs of lifting with mainline industry gasping for breath, the real estate sector seems to be attracting all the action. But is everything as hunky dory as is being made out to be? A lot of things make no sense logically, at least to me.
Open any mainline newspaper and chances are that the front page will be a on you face advertisement of yet another premium project coming up in the city. If the market was really as good as it is claimed, then why these extremely expensive advertisements to grab your attention? Surely, the realty sector, not known for its largesse, is not splurging for the sake of it? Is it then, a desperate attempt to market products – push by advertising – that has a few takers?
If such is the case, then when will the real estate bubble burst? Or, why has it not burst so far, even while there is blood on the streets? The answers are not far to seek. For one, it is not correct to say that the entire segment is suffering from a lack of demand. On the contrary, the lower and the middle segments are witnessing robust action, even sporadic growth. However, the premium and the super premium segments are, despite the volley of objections from industry circles, facing problems.
These segments are typically fuelled by investment buying – the rich and the super rich parking their idle funds in the hope of appreciation and in an attempt to hedge against inflation. “Land and gold” said one prominent investor, “our forefathers taught us are the safest bets as investments and continue to remain most popular.” Add to it the speculators, who borrow monies at market rates and by paying the upfront fraction book properties with a hope of making a killing. Because of their heavy involvement and cross trades between the developed and financers, the demand is maintained, however artificial it may be. “It is not a healthy sign” said another analyst, “but is working fine till now. However, how long it will sustain, if at all, is something that I am not qualified enough to comment on.”
The involvement of unaccounted money in the sector is another aspect that everybody acknowledges but nobody has the right figures to quote. How much unaccounted, or black money is there is the construction industry, what are the economics of deployment, how they are rolled, what happens to the illegitimate children of such ill-gotten funds, how they are accounted are questions that are not only unsavory but are also generally avoided for fear or favour, passed off as acts of omissions and commissions.
“As opposed to the stock markets, where the bears are out to maul given the slightest opportunity, the realty sector has only bulls” said a builder not wanting to be named. “As we are sellers ourselves, we can not only regulate the quality that we make available in the market at any given time, but can also jack up prices to cover the cost of borrowing and normal profits for the investors. This way, there is hardly any downside – risk is you may put it that way – making investment in property one of the safest bets going. Distress sale and bubbles and prospects of going burst are mere terms that you media people make up to garnish your stories with sensationalism. Fact remain, we are responsible and are highly regulated. Yes, you can join us on the upswing with no fear of a fall.”
Sure, but what of Newton? The guy that postulated that “anything that goes up has to come down?” My friendly neighborhood builder smiles. “there are exceptions to every rule and even Newton could not mention a time frame for the fall, did he?”
Now the million dollar question – with an overheated property market, is India about to do an Asian Tiger fall trick? The answer, is an overwhelming “no”. Not at least in the near, foreseeable future. The brotherhood has got things covered. Besides, buying a house, investing in a property, owning a home of one’s own still continues to be the primary dream of the population and will continue to remain so, ensuring that the prices hold and that the sector continue to prosper.