The gigantic Indian realty sector grumbles & groans

While the lovelorn Presley look-alike gorilla met his imbecile downfall because of his rising prime ‘interest’ in Ann Darrow, a young and most desirable protagonist in the movie, India’s real estate sector – displaying a brilliantly remarkable shallow foresight – had to shove down hard on all its brakes in reverse gear due to, yes, rising prime ‘interest’ rates.

But first, let’s describe our interest infatuated sector for all its worth. The real estate sector in India has grown into an enormous $16 billion behemoth in terms of size (Assocham projections), spawning a journey that started thanks to some overzealous, and not so clumsy pioneers (the exemplary K. P. Singh of DLF being one of them), who had the business acumen to acquire vast tracts of land and develop them into sprawling commercial & residential complexes. In the past two years, property rates across all metros have shot up by more than 100% and the situation in the tier-II & III cities is almost analogous. The sector has been growing very fast indeed, with a respect- able CAGR of 15% over the last decade. If one were to hone in on the two most critical reasons this happened in the past few years, it was clearly the availability of loans at dirt cheap interest rates on one hand, and on the other, obviously, spectacularly rising demand. But the segment, which was supposed to have been a part of the closely supported and regulated infrastructure segment, was quite surprisingly allowed by the government to play to the galleries following the standard rules of market capitalism.

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Source: IIPM Editorial, 2008

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