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1.2 crore vacant homes– This one number tells us all that is wrong with Indian real estate

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1.2 crore vacant homes– This one number tells us all that is wrong with Indian real estate Empty 1.2 crore vacant homes– This one number tells us all that is wrong with Indian real estate

Post by confuzzled dude Sat May 02, 2015 8:50 pm

Even though there is a huge housing shortage in urban India, 1.2 crore completed homes are lying vacant. As the latest Economic Survey points out: “At present urban housing shortage is 1.88 crore units.”

So, we have this situation where 1.2 crore completed homes are lying vacant even though there is a housing shortage of 1.88 crore in urban India. What explains this discrepancy? “95.6 percent [of housing shortage] is in economically weaker sections (EWS) / low income group (LIG) segments,” the Economic Survey points out.

What the huge number of vacant homes also tells us is that real estate companies have been building and selling homes at price points at which there are few takers. Why is that? The answer for that lies in the fact that homes are being built essentially for those who want to invest and speculate.

Hence, investors control the real estate market in India instead of those who want to buy and live in homes. These investors are more comfortable keeping the homes empty and not put them on the rental market. The rental yield (i.e. annual rent dividend by the market price of the home) currently varies between 2-4% depending on which part of the country you live in. Hence, the return is not good enough to compensate for the risks involved in letting the house out on rent. Given this, a lot of homes are bought and then stay locked.
http://www.firstpost.com/business/1-2-crore-vacant-homes-one-number-tells-us-wrong-indian-real-estate-2220612.html

confuzzled dude

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