Boom Boom, shake a leg or ..

Real Estate has become the de-facto investment standard in India for everybody. Growth has been stupendous in most markets and people in general are thirsting for more which in turn is fueling this market. Wonder if all this demand is inflated..How much land does one need? I have seen people buy acres and acres of land. Do we really need that much? As a kid playing Monopoly, that is what I used to do. Get onto a square, if I had the cash and if the rent/return for that place was significant, I just bought it. Well, now I am no longer a kid and I am not playing Monopoly. The equation is a little different too. When I played Monopoly, I had opponents to play against and bought places with an anticipation for rent.

But now, if everybody owns properties and nobody runs on the monopoly board, how would I earn my rent? Most investments in RealEstate are from NRIs who "most probably" will not come back. Prices are really not affordable for RIs and will totally get out of reach soon. It is a scary thought that most of this "new" land is going to be owned by people not residing in India(I am an NRI myself and have nothing against them). Think about it. Real Estate is an asset and you are making a profit out of it. What if our government decides that there is enough of a bubble in Real Estate and starts taxing us for the big gains we make in Real Estate? What if they impose a ceiling of some kind? And what if aam junta (common people) decide that enough is enough and stop participating in the market? Demand would slide, so would prices!

Globalization has made people reach out beyond Geographical boundaries, but our demand for land is still very localized. Technology is increasingly making internet a more collaborative environment. Telecommunication is getting faster and cheaper with VoIP, WiMax, Broadband, Fibre Optics etc. Employees are increasingly WFH (working from home), companies are formally introducing Green days (working from home for employees) and still our demand for land is extremely high in and around hi-tech city in Hyderabad and other similar areas in other cities which in my mind should and will change.

For now, banks are keeping our feet hot by encouraging us to invest by providing loans with very low interest rates, but unrealistic demand cannot hold itself for too long. I personally feel that investing in and around these "high-tech" areas is not the best of ideas at the current moment and that channeling all your assets into real estate is not good too. At the same time, you don't want to lose out in this booming market unrealistic/realistic. So, what do you do? For one, Invest in land but don't make it your investment ....and well, how about not making it localized? Steps in that direction will make the demand curve more realistic and investments a lot less riskier!