Real estate bubble burst now a matter of time: Vallum Cap

Manish Bhandari

Favorable demographics, acute shortage of housing, easy credit condition and high velocity of illicit money in the economy over the last few years made real estate one of the most preferred investment bets in India.  This consensus trade was also supported by other factors like high inflation, negative return by bank fixed deposits over inflation, and chequered performance of equities. (Click here for full report)

The real estate price was following 'amplification mechanism', whereby, a large increase in asset price is followed by a higher demand, as investors think that further increases in prices will follow. However, the tide now appears to have turned.

Factors like tighter monetary policies by RBI, depressed domestic economic conditions, exodus of private equity funds, outflow of money from the property market for impending elections are converging after a decade setting a stage for a deep correction in Indian real estate.

(Manish Bhandari, CIIA is CEO and Managing Partner Vallum Capital Advisors, a firm in investment advisory and consulting for start up businesses based out of Mumbai.)

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