Indian real estate – PSU banks – politicians – unholy trinity

Today I am sharing a quick 5 minute video clip and an interesting article with you. Ajit Dayal, the man behind Quantum Mutual Fund talks about how Indian real estate, politics and banking is intimately connected and works against the average home-buyer in India.

Apartment in GurgaonSource: Deepak Gupta

In a nutshell, he analyzes the situation during the period between 2008-09 when the global financial crisis hit us. He describes how public sector unit bank (PSU bank) lending to real estate companies increased by a big amount in a bad year when private banks were going slow. His contention is that this enabled many real estate players to maintain high real estate prices in the face of a practical strike in real estate purchases by buyers. He rightly points out that the PSU banks are controlled finally by politicians. And we all know that the Indian real estate sector and politicians have a very close relationship.

I highly recommend reading his article on the Indian real estate sector that he wrote in 2009.

Ajit Dayal on the nexus between politicians, banks and how it affects real estate prices in India.

Join the Start Stock Investing E-Course. It's free.

15 lessons over 15 weeks. Over 500 people who have already signed up. Start off. Learn how to invest in stocks for the long-term.

Comments

  1. Anil Kumar Tulsiram says

    I am Perma bear on real estate in India. I don’t know when the correction will occur. Its quite possible that it may not happen for next 10 years. I am just not able to understand how real estate prices can continue to rise or even stay flat and market prices of most of the real estate companies doing so badly. Ajit Dayal has explained it very well. Firstpost tries it bit to regularly expose link between PE, politicians and real estate players to keep the prices high. Either physical market is making mistake or our share market.

  2. says

    Yes Anil, the politicians and the banking system are perpetuating this craziness. There is also private equity money pouring in to real estate. I don’t know how much of it is round-tripped. There is FDI money coming into the real estate sector. Again much of it could be round-tripped.

    I feel that the drivers of real estate are the tremendous amount of black money that is sloshing around. But then I feel that even buyers with black money have to take a decision eventually to see whether there are any “greater fools” left. There should be someone to buy the property bought by them at a “unreasonable price” at an even higher price. There will be a top. Its a matter of time.

    I honestly have given up trying to find out when. I suspect it will happen in the coming year. But then again, its a market which is very twisted and distorted. Let’s hope it corrects for the common man’s sake!

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>