Recently, I read in news paper that average price of "flat" in mumbai is well over Rs. 1 crore. Cheapest flats are available in Bhandup suburb which costs around Rs. 1.14 crore. These flats well out of reach of self made upper middle class. What is reason behind such high prices? As per concept of market economy there must be more of demand than supply. Demand should exceed supply by really big margin. It also suggests "high affordability" of people staying mumbai. Considering income from "known sources" it would be impossible for "self made" doctors, engineers, bureaucrats etc. to own a house in mumbai. What is source on liquidity in real estate sector? From where does "demand come"? These are some tricky questions to be answered.
Many analysts says many things. Most common conviction is entry of "black money" in real estate market. Other convincing theory is bubble theory. With entry of "corporates" in real estate sector projected ratio of demand and supply is falsely projected on lower side. But can this bubble sustain for too long? Market analysts opine against it. Builder politician and corporate lobby are working in nexus. Politicians help builders get "soft loans", advertisements show false data of sold flats. Finally needy person ends up paying around double-triple amount of the actual value. As per market experts this bubble is not going to sustain for too long. In future, 5-10 years down the line, when current investors try to sell the property there will be scarcity of affording buyers. With increasing population in satellite cities of Thane and navi mumbai, shifting of corporate offices in suburbs and infiltration educational institutes in these areas and provision of almost all facilities in these peripheral suburbs, demand of property in mumbai is going to stagnate and then decline in future.
Recent census data with evidence of declined population in south mumbai supports above arguments. Now it's up to investor to decide..."is it wise to invest in real estate market of mumbai?" Another million dollar question is.."Will real estate market of mumbai suffer crisis as that happened in U.S. 3-4 years ago?" Stagnation of real estate during 1995-2002 in mumbai is another example of "burst of bubble". Stock market crisis is another example of such bursts. CAN REAL ESTATE MARKET OF MUMBAI LEARN FROM HISTORY AND CORRECT ITSELF GRADUALLY?
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