May 7, 2018

What is Real Estate bubble?


Stay Alert -  Series 15

The real estate bubble indicates to the significant falling down of the real estate prices. This is a conflicting behaviour of the real estate field since it always forecast that real estate prices rise over a period of years.

The Indian economy – present situation
It is necessary to understand the present situation of the Indian economy. Recently, the prices of shares in share market are rising and the market is good for building investments. 

The investors can harness the opportunities available in the trading market for earning profits. We can surmise that Indian economy is taking maximum efforts to eliminate inflation and maintain stability in the currency of Indian Rupee.

Present Indian economy and real estate field:

The improvement of an economy can be truly judged by observing its real estate prices. Let us understand this process in detail. When there is decline in real estate sales, there is decline in real estate prices. This leads to the fall in the property value. The home owners are less interested in purchasing property and do not ask for home loans. 

This automatically reflects decline in consumer spending thereby, reduction in GDP. Thus real estate prices help in evaluating the progress of an economy.

Many unexpected issues can be traced in India. For instance, the real estate prices are not going upwards except in cities such as Mumbai. The interest rates altered by RBI are not helping the people to get more home loans. Thus, in places like Mumbai, the real estate market against the expectations is facing a downfall.

The real estate bubble situation was found in the year 2008 in the United States when the housing market completely collapsed. Many banks and other financial institutions had to face the crisis and adverse conditions during this period. The Indian economists have predicted a similar real estate bubble and its near situation is seen in India post 2008 crisis. This real estate bubble shares similarity with the US bubble of 2008. Let us first understand the real estate bubble and what is meant by its bursting.

At present, the bubble situation can be seen. There has been considerable fall in the real estate prices as witnessed in many cities. Builders and developers are deliberately not decreasing the prices of real estate property.

What actually is bursting of a real estate bubble?

The developers stop their construction projects during this phase. There is no stability between the demand and supply forces in the real estate market. The interest in investing and buying houses declines amongst the people due to various reasons. The developers continue not to cut real estate prices with the fear of panic situation. At the crucial point of time, they cut the prices of real estate prices and the bubble bursts finally.

It is always advisable to wait for the bursting of the bubble before investing in real estate domain. After the bursting of bubble, the prices of real estate property go down considerably. You will get a wide range of properties for investing purpose and as per your requirements.

Stay Alert and Stay Safe. 

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