Summit Notebook
Exclusive outtakes from industry leaders
A bubble in the real estate market?
Have you tried buying or renting a house in Mumbai recently? If so, then I won’t be surprised if you think real estate prices are plain expensive, and incredibly so. But that’s almost always been the case in India’s commercial capital. After all, when was the last time someone told you they got a cheap house in the city?
So is the real estate market in a bubble? We asked Adi Godrej, the man who controls Godrej Properties, if things could get bubblicious. This is what he had to say: “I don’t think we are in a bubble, because demand is strong, but we could get into a bubble.”
Godrej, whose family fortune is estimated to be about $5.2 billion, doesn’t really care if prices go up in south Mumbai’s old-money neighbourhoods such as Malabar Hill or Altamont Road, where Reliance Industries chairman, billionaire Mukesh Ambani, is building a 27-storey $1 billion home.
“I would be more disturbed if middle-level and lower-level housing in Mumbai were to go up much,” Godrej told the Reuters India Investment Summit in Mumbai.
Godrej Properties, which is developing a lot of what is termed ‘affordable housing’, expects revenue to jump more than 50 percent in the fiscal year ending in March as rising incomes boost demand for housing.
If prices continued to increase at current supply levels, the Indian residential market could head into a “bubble.”
The company, part of the $2.5 billion diversified Godrej group, defines ‘affordable housing’ as an apartment that carries a price tag of less than 2,500,000 rupees or $50,000. Is that within your budget?
Paranoid governments and conspiracy theories
Adi Godrej, who marshals his namesake $2.5 billion diversified group, believes the Indian government is “paranoid” about the possible effects of allowing more foreign investments into sectors such as airlines.
“They (the Indian government) have not allowed foreign airlines to invest in private airlines, and they cite security. I don’t see what security would be compromised,” Godrej told the Reuters India Investment Summit in Mumbai.
“If British Airways or Delta got to own part of an Indian private airline, they are worried about what would happen in times of a war, etc. You are in control of your country. What can they do in difficult times to stop it?” he said.
Godrej also said that allowing more private players into sectors such as roads and education would help lift India away from infrastructure perils plaguing the country.
It’s not hard to think of Indian government officials sitting at their gnarled desks in crumbling office buildings doing what Mel Gibson’s character did in the movie Conspiracy Theory. But as Mel Gibson discovers, the enemy probably lies within. How’s that for a conspiracy?
Also,the current uncontrolled inflation in food prices, especially vegetables and pulses point to a very synchronised plan by the Government and Retail majors. They are trying to prove a point that FDI in retail is the only way to curb this increase.
Same approach was noticed a decade ago, when the govrnment of Maharashtra started load shedding (electricity supply in spurts) to make the lives of it’s residents miserable, and then paving the way for Enron to set in.
