Sustainable, Resilient, and Better all Round…There’s Light at the end of the Tunnel
Ok, take your pick, short term stimulus or long term growth? And if you don’t know the difference, you might want to stop reading now: but assuming you do know the difference, which would you really prefer? It’s a serious question, perhaps the most serious of our troubled times: as the world emerges from COVID lockdown restrictions that have created the biggest economic downturn for three hundred years. So which do you prefer: a bunch of Russian Oligarchs buying up apartments in London and Mumbai, raising property prices for most of us in the middle of an unprecedented housing crisis, and then leaving their swanky apartments empty to generate tax losses? Or do you want demand driven growth, built on the hopes and aspirations of ordinary people across the globe? The question only needs stating to give us the answer…because non-speculative growth is sustainable, resilient and better all round.
And anyway, most of those Russian Oligarchs don’t seem to have so much money to spend these days.
So how do we feel about the Subcontinent’s property prices being projected to rise by 8% over the coming year (www.indiaratings.co.in)? Well, I suppose that depends doesn’t it…it depends whether this is speculative or sustainable growth.
You can breath easy: there’s nothing speculative about growth trajectories for Indian Real Estate. As the source of that report, the Indian and Ratings Research Agency, confidently put it recently: “ The current housing sales uptick and increased demand is end user driven and not speculative…and the surge in supply has not been met by any sharp increase in prices”.
And as ever, of course, when it comes to the Subcontinent, sectoral growth seems to be centred on the commercial power houses of Bangalore, Mumbai, Pune and Hyderabad: but across the length and breadth of the country too, informed commentators are still expecting a 12% increase in year on year property prices over the course of next year.
It’s an even more impressive picture when you place it in context: from the nadir of the pandemic, Indian property prices have increased across the board by 40% in the space of a year, and developers (increasingly incentivised by Government Housing Programmes), are uniformly expecting better times ahead, with affordable housing making up some 50% of expected sales.
And keep that last point in mind: the Foundations Strategy Group (www.fsg.org) estimates there are currently up to 37 Million households in India who are living either in slum conditions or unauthorised housing, and the domestic housing shortage is running at 18.78 Million units: 71% of slum neighborhoods (and we’re talking mostly about Bangalore, Mumbai, Pune and Hyderabad here (see above)), lack basic sewage systems, 66% have open drainage, and 41% either have a dry-pit latrine, or no latrine at all. Speculative Russian Oligarchs aren’t going to do anything about that…
But India will (and is), and at the end of the day, that’s why the projected housing boom on the Subcontinent matters so much…more homes for the homeless, more hope for the hopeless, and, at last, light at the end of a long, long tunnel.
Short term stimulus is never a substitute for long term growth, and especially when it comes to housing policy in our post pandemic word: by addressing systemic homelessness, India is showing the way.
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Red Ribbon RE RISE India Real Estate Fund is a multi asset class closed-end fund registered in Luxembourg offering investors the opportunity to participate in Growth and Emerging Markets and Mainstream Impact Investments, such as India, that offer returns rarely available in western markets.
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