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Why a fall in real estate prices is the need of the hour for the Indian economy

ramadhir
Tue, 25 Aug 2015 19:45:19 GMT

Raghuram Rajan read out the riot act to the real estate lobby. He wanted them to do their bit, in reducing the cost of real estate, before the banks reduce interest rates. Here are 9 reasons why a fall in real estate pricing is most important to India. 1. The enormous unsold inventory has to be brought down. It starts with the cost of homes and not interest rates on home loans. 2. Much of the parallel economy (read Black money) starts and ends with real estate. Bring down the cost, and the black money evaporates. Real estate is bigger than those we are searching in Swiss banks. 3. It is only in India that the rental yield on real estate is 2% and interest cost is 12%. Only fools still borrow to invest in real estate. Especially, when there is zero capital appreciation. This gap is because of black money. They have to converge, and it starts with the cost. 4. The rental cost of real estate for business is as high as 10%. Businesses cannot survive with such high cost. Many businesses will become viable if real estate costs come down. 5. The surest way of hitting at po liticians and Mafia is by reducing cost of real estate. It breaks their spine and hits them where it hurts the most. 6. Real estate is now a bubble. It has to be burst before many ordinary people get sucked into it. We have to save their hard earned money from being evaporated. 7. Real estate in India costs as much as in US or any other developed country. However, Cost of living is not even 1/3. The difference has to be bridged. 8. Housing is a need, not a luxury. And land is a national asset, not to be hoarded or profiteered. State intervention through market forces and fiscal interventions be ex existed to make home buying affordable. 9. Reducing real estate costs reduces inflation and allows RBI to work on reducing interest rates. The cycle kicks off with real estate lobby than with RBI.

satishchanna
Tue, 25 Aug 2015 19:46:28 GMT

We need extremely stiff and painful penalties for developers delaying completion of project beyond stipulated date of possession. This is how they postpone development and ensure supply is curtailed. Also we need vacancy tax on unsold and sold vacant properties, and interest must not be allowed as deduction on vacant properties. Automatically we will see either properties coming in market or getting sold off. Supply and pricing issues will get resolved.

tejsingh
Tue, 25 Aug 2015 19:47:51 GMT

But first our land records should be made transparent . Exposure of bogus deals will discourage Black money hoarders to invest in this sector.