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Real estate will get more expensive due to political greed than any other kind of development. The supply of real estate is artificially constrained by the poli

Real estate will get more expensive due to political greed than any other kind of development. The supply of real estate is artificially constrained by the political class, so any kind of development (say hypothetically manufacturing instead of software) will make it expensive. There used to be a time when new land for building houses was frequently sold by the government in the form of new "colonies", but that has completely stopped. The local political greed (municipal corporators, mayors, MLAs) has destroyed most Indian cities due to lack of planning, and this small fish only cares about short term money they can make.

akudha 4y ago
What you are describing is one part of the problem. I have friends who earn in dollars. They can easily afford to buy a couple of apartments every year. They do this and let those apartments sit vacant for a few years, waiting for them to appreciate. When many people start doing this, it artificially inflates the prices.
- rendang 4y ago
  Sounds like a job for Georgism (if you are up for radical economic transformation) or a vacancy tax
- wobbly_bush 4y ago
  That can be solved with tax/other laws. Guess who will be most impacted by those laws? Not people with one or two apartments as much, but those who do in large scale - that is again politicians and their helpers who help launder illegal money this way. If there are loopholes in the law, people will abuse it but we have to realize the loopholes are not meant for the layperson but the powerful few who abuse it at much higher scale.
- searchableguy 4y ago
  It doesn't work that well in practice. While real estate is overinflated for buying, rental yields reflect the market. They are under 2-4% of the property value in most places. India is also expanding vertically in cities so new housing is often built in different area and older infrastructure is not maintained in the long run. A significant portion of real estate is built on under the table money. You often pay 30-50% of the value in black money. So, real estate is a very illiquid investment unless commercial in India. There are also cultural reasons for artificially inflating real estate and Indian property developers are under huge loans similar to China. It won't be sustainable.
- nicbou 4y ago
  "Everybody works but the vacant lot" https://commons.m.wikimedia.org/wiki/File:Everybody_works_but_the_vacant_lot_(cropped).jpg https://commons.m.wikimedia.org/wiki/File:Everybody_works_bu...
spaceman_2020 4y ago
A big reason why Gurgaon real estate is more expensive than Bangalore despite having way more land and poorer jobs is government corruption. All those bribes and backroom deals get siphoned off to buy apartments and land. These buyers can hold forever because their cost basis is practically 0. I’m actively hunting for an apartment in NCR and get painfully reminded of how poor I actually am.
- 1024core 4y ago
  There was a time when we were living in Delhi and we used to drive down to Jaipur, where our extended family was. We kids looked forward to the drive, as it meant nice stopovers, snacks, etc. After leaving Delhi we would , after an hour or so, make our first stopover in a little village called .... Gurgaon! There we would have chai, samosas, etc. In those days Gurgaon was separated from Delhi and a sleepy little village. When the capital expanded, those villagers became instant millionaires. A lot of comments in this thread are crediting TCS, Infosys, etc for lifting people out of poverty, but another factor was the skyrocketing realestate prices. Small-time farmers who could barely make ends meet suddenly were sitting on million-dollar land holdings.
  - Scoundreller 4y ago
    How much of this has to do with credit expansion and how much from cash purchases of those properties? (Though I suppose an urban software developer is a good credit risk)
- newyankee 4y ago
  I visited NCR for first time recently and found that although the metro is amazing, NCR still remains a large urban sprawl whose land potential has not been utilized properly. With continually developing infrastructure on more metro, RRTS etc. hopefully the land utilization also improves.

akudha 4y ago

What you are describing is one part of the problem. I have friends who earn in dollars. They can easily afford to buy a couple of apartments every year. They do this and let those apartments sit vacant for a few years, waiting for them to appreciate. When many people start doing this, it artificially inflates the prices.

rendang 4y ago
Sounds like a job for Georgism (if you are up for radical economic transformation) or a vacancy tax
wobbly_bush 4y ago
That can be solved with tax/other laws. Guess who will be most impacted by those laws? Not people with one or two apartments as much, but those who do in large scale - that is again politicians and their helpers who help launder illegal money this way. If there are loopholes in the law, people will abuse it but we have to realize the loopholes are not meant for the layperson but the powerful few who abuse it at much higher scale.
searchableguy 4y ago
It doesn't work that well in practice. While real estate is overinflated for buying, rental yields reflect the market. They are under 2-4% of the property value in most places. India is also expanding vertically in cities so new housing is often built in different area and older infrastructure is not maintained in the long run. A significant portion of real estate is built on under the table money. You often pay 30-50% of the value in black money. So, real estate is a very illiquid investment unless commercial in India. There are also cultural reasons for artificially inflating real estate and Indian property developers are under huge loans similar to China. It won't be sustainable.
nicbou 4y ago
"Everybody works but the vacant lot" https://commons.m.wikimedia.org/wiki/File:Everybody_works_but_the_vacant_lot_(cropped).jpg https://commons.m.wikimedia.org/wiki/File:Everybody_works_bu...

spaceman_2020 4y ago

A big reason why Gurgaon real estate is more expensive than Bangalore despite having way more land and poorer jobs is government corruption. All those bribes and backroom deals get siphoned off to buy apartments and land. These buyers can hold forever because their cost basis is practically 0. I’m actively hunting for an apartment in NCR and get painfully reminded of how poor I actually am.

1024core 4y ago
There was a time when we were living in Delhi and we used to drive down to Jaipur, where our extended family was. We kids looked forward to the drive, as it meant nice stopovers, snacks, etc. After leaving Delhi we would , after an hour or so, make our first stopover in a little village called .... Gurgaon! There we would have chai, samosas, etc. In those days Gurgaon was separated from Delhi and a sleepy little village. When the capital expanded, those villagers became instant millionaires. A lot of comments in this thread are crediting TCS, Infosys, etc for lifting people out of poverty, but another factor was the skyrocketing realestate prices. Small-time farmers who could barely make ends meet suddenly were sitting on million-dollar land holdings.
- Scoundreller 4y ago
  How much of this has to do with credit expansion and how much from cash purchases of those properties? (Though I suppose an urban software developer is a good credit risk)
newyankee 4y ago
I visited NCR for first time recently and found that although the metro is amazing, NCR still remains a large urban sprawl whose land potential has not been utilized properly. With continually developing infrastructure on more metro, RRTS etc. hopefully the land utilization also improves.