On the latest episode of The Capitalmind Show, we get Deepak Shenoy to shed some light on the housing market in India. Traditionally, buying a house in India has been fraught with complications. Even if you set aside the alleged large-scale laundering of black money that occurs, there are so many loopholes in the system that developers were always at an advantage.
For example, it was perfectly legal for developers to take downpayments on houses, then use that very money to build the property. In an ideal, ethical world, there would be no problem with that solution as long as the developers collected enough money.
However, in the real world, they rarely collect enough to finance a project of that scale, and they are involved in so many projects at the same time that the money is rarely sequestered in one layout. This leaves the customer in the odd position of being a lender and client to the developer, but without the recourse to retrieve their money in either capacity.
Additionally, with the drastic growth of urban cities in India in the last 25 years, there has been a boom in the number and pricing of houses. However, it has been noticed that anticipated “luxury market” has failed to take off, and that developers are now focussing on middle-class and lower middle-class housing.
With the implementation of the RERA policy in mid-2017, this dynamic has changed. No longer can customers be held over the barrel by developers. Additionally, with the demonetisation move of late 2016, there was a drying up of both white and black money for developers to use for new projects.
Yet, prices and project numbers have continued to go up. People are still migrating to cities, and they still need affordable living situations. So, what’s going on? Is the market responding to the needs of the people? Have developers figured out how to work with RERA and demonetisation?
You can listen to this video as a podcast here.