“Fools build houses and wise men live in them”. My grandfather, who never tired of repeating this adage, was fervently opposed to owning property because he saw it as blocking too much money into something that would not yield a good return; it was better, he argued, to put it in the bank and receive interest. I can’t help but wonder what he would have thought about this today when the house that he lived in, and ironically did own, is approximately ten thousand times its value than it was in 1950.
The property boom in India is riding on one of its highest waves ever. A recent headline in The Times of India, one of India’s largest newspapers, informed that a house in Delhi’s Amrita Shergill Marg (think Park Avenue) was sold for 137 crore rupees, roughly thirty million dollars – and this is far from the highest bid to have made headlines off late. Today, Mumbai and Delhi are spoken about in the same breath as Tokyo and New York when it comes to real estate prices. A plush 3,500 square feet apartment in Mumbai’s coveted Cuff Parade area (think Upper East Side, New York) could cost you 24 crore rupees, about five million dollars, if you want things like a nice sea view and parking space for at least five cars. If only my grandfather had not sold his property, I’d be sipping Pina Coladas on an exotic beach and writing a travelogue!
The recently moneyed upper-middle class as well as rich NRI’s (Non Resident Indians) are investing huge chunks of their income into the market, which in turn is leading to a rise in prices and prompting still more people to invest. Stories about prices doubling in less than a year have only fuelled this craze, convincing many of this being a sure shot at making quick money. Housing loans, as a result, are being handed out like hot cakes to twenty and thirty-somethings who, in a certain segment of course, are being paid enough to take on such financing.
Builders, obviously, are trying to make the most of this boom. Open any newspaper and you’ll see full-page advertisements that promise to sell you your dream home in a complex equipped with spas, swimming pools, tennis courts et all. In Gurgaon – an IT hub near New-Delhi which hosts companies like Microsoft and GE and where there is a demand for high-class apartments for these employees- one could buy a modest apartment with all amenities (swimming pools, tennis courts, sprawling lawns etc), power and water back up (an important factor to consider in India) for something like a two hundred and fifty thousand dollars, or you could go for a luxurious penthouse overlooking the golf course – supposedly by invitation only- for about a million dollars. If you think you got the green and can just pay your way through, think again- most of these penthouses appear to be sold out! Two years ago these very penthouses were about four hundred thousand dollars and I wondered why anyone would buy them for investment. Common sense told me, and I know now why I could never be in the real estate business, that this was already overpriced and could not possibly rise any higher. Well, so much for my common sense.
Metropolitan cities like Delhi and Mumbai being saturated, the boom is now spreading to the smaller towns, or to far off suburbs – so far considered distant poor cousins – who now suddenly find themselves very much in demand for their apparent proximity to these cities. You drive onto a highway close to most prominent cities today and you’ll see huge complexes coming up where builders promise to construct Utopian localities with state-of-the-art homes. Their pamphlets are snazzy – showing soft focus, glitzy photographs of the interiors awash in warm yellow light, with merry children and affable housewives sauntering about blissfully. They often have names like ‘Emerald City’ or ‘Dream Towers’, and tell you all about the magical township and goading you to invest in the house of your dreams. One pamphlet I read even declared that in their township “even the mundane feels exotic”.
Malls and Multiplexes (one that houses both cinema halls and shopping complexes under one roof) are the other craze; they seem to be sprouting up on any piece of vacant land that becomes available. Asia’s largest mall, or so it has been claimed, is being built a stones throw away from where I live – an idea that somehow that does not excite me.
Commercial prices have seen a massive rise in the past year as well. In November 2006, a mere 1463 square feet of commercial land in Sector 18, Noida (another Delhi suburb) fetched a whopping two million dollars, at a rate of 1360 dollars a square foot.
But all this is scary. To me, this escalation seems artificial and I feel that the bottom might well fall off one day. I still believe, my earlier instincts been proven wrong notwithstanding, that such dramatic rise is abnormal since it’s largely being fueled by speculation. What makes me wary is the fact that a lot of these properties are being bought for investment, some of them primarily by the NRI community. That, however, is not a sentiment shared by most and deals are being swung and large sums of money changing hands even as I write this.
It is another sign of the new India where people are buying stylish apartments in their youth, as opposed to their parents’ generation when they worked till they retired, and finally built a modest home. And some of these homes are as plush as it gets with each room having a theme recommended by a designer, plasma TVs, expensive art and Italian furniture (if it’s expensive furniture, it must be Italian). Whether the property boom continues of not, one thing is not going to change and that is the mindset of this generation – take risks, invest wisely and live it up.