India, like many other parts of the world is zooming away in the face of a real estate boom. In India there is a real estate boom in any direction you wish to see. Whether it is Bangalore, Pune, Calcutta or Chennai or Hyderabad or even already sky high Mumbai the story is the same.

Just a few years back, Mumbai was dying in the face of a sharp shortage of housing options. But now things have reversed and there is a glut of housing options if you have the money. Now apartments are more than just houses. They are about lifestyle.

The concern is that in India, stock prices are at the height of a boom. As it happens, a boom in one sector (usually stocks) translates into a boom in another sector usually ("")real estate with investors rushing to park their money in a safe place. Also, add the foreign exchange glut in India fuelled to a great extent by software engineers parking their dollar salaries in real estate (especially near the tech hubs). Low interest rates (relatively, as compared to 10 years back) over the last few years made bank loans easier. Needless to say, it became a self fulfilling boom. There is a latent demand for housing in India, but the people who buy today do so more with a view to make money out of rentals rather than with a view to stay in these houses. The end result is that people own multiple houses, when all they need is one (feel free to differ with me here) and real estate is now a speculators paradise.

On the other hand it is true that there is a lot of demand for real estate options in India. Vast portions of India are undeveloped or underdeveloped, but this is not necessarily where the boom is happening. Also, the “connections” in terms of better roads, urban transport systems, public transport, water and reliable electricity need to improve by leaps and bounds. People want cheaper, affordable (not low quality) housing options too, which at least in places like Bangalore is non existent. The market at the premium end is only so much. A significant portion of the demand is real, but with about 20-25% (as per various estimates) driven by speculation.

But interest rates in India have slowly started rising. That means that loans will be harder to get (and service). Optimism about future salaries still holds true with India fairly at the bottom of the pyramid as far as outsourcing goes there is still some space for rise there. By 2010, Indian sensex will be back to 17000, appropriately values. Worldwide recession esp. due to asset meltdown will lead to protectionist policies. all the “coolie” programming and BPO for sahibs abroad will go away. Bangalore and gurgaon would be back to their old Indian ways…The chastened NRI that returned to India w/ hige expectation would again make a beeline in American embassies…globalization is an old game. Till the big guys are making money off it, it will chug along. Afterwards, jai maharaj.

Yes it is unusual that the("")real estate and stock-markets have run-up at the same time, and not one after the other in this round. The currently higher confidence factor on the future, easier availability of personal("") real-estate loans from the nationalized banks, and of course higher income levels have caused this demand. In addition with the tax-structure allowing only anything like housing loan deduction (interest+principle repayment) salaried people have moved to it in a big-time. Will any of these factors go away in the near term.

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