[www.keralites.net] Raghuram Rajan's note on Real Estate

 

  

Realities of real estate's inflated costs in India revealed by our RBI Governor RR.

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Raghuram Rajan's note on Real Estate...Awesome Piece

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 actually 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 politicians 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 must 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.
--a

​Circulated by:

K.Raman.​

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Posted by: Raman K <kraman_4@yahoo.com>

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