Evaluating housing market trends in India: Is there a bubble?

Abstract

The intent of this project is to initiate an independent investigation about the Indian Real Estate bubble through the lens of a business management student. The analysis is based on intuitive parameters which reflect stagnation of prices, demand-supply dynamics, or market confidence. The initial motivation for the project has come from the curiosity of the authors of this report in terms of anomalous behaviour of the real estate segment (especially Housing). India’s real estate market has been a favourite for domestic long term investments due to its consistent performance in the face off global economic crises. In the recent years, active participants in the market have observed increase in unsold inventory and correction in prices in major cities. However, new property development continues with vigour. The basic principles of demand-supply seem to get stretched while trying to explain this phenomenon. The Opinion pages in economic dailies have long speculated reasons such as resilience of domestic real estate players, holding capacity of domestic investors and cultural factors affecting investor sentiments. How long will the market be able to hold the prices is a million-dollar question. We plan to make fresh observations from the available data without reciting the already available extensive research on the subject. The goal thus is not to predict a bubble or a burst but to describe the trends and underlying reason. We have restricted our analysis to the following 10 cities: • Greater Mumbai • Chennai • NCR Delhi • Bengaluru • Hyderabad • Kolkata • Pune • Greater Chandigarh • Ahmedabad • Lucknow