Indian real estate - The bubble has burst !

With the recent currency swap in the fight against black money in India, the sectors of the economy that was influenced by black money will be affected very severely. It's not just the paper money that is taken out, but the economic demand that has been created with this black money is destroyed. So, one obvious casualty is the real estate sector  that has seen rapid speculation in the past 2 decades. It's going to be a brutal correction and a prolonged plunge in prices anywhere from 50% down to much lower. This may seem too much, but if you think about the exponential growth in real estate all these years,  a huge bubble developed and that has literally burst now. There is no floor to support the downside as the liquidity that was supporting it previously has been completely sucked out of the system. It some cases, the price will even fall below the actual registration value. If there is any market indicator as in the financial markets, this would be at the least be similar to the  collapse of the stock markets in the 2008 - 2009 Global financial crisis. But, the recovery happens much faster in the stock markets unlike in real estate as the soundness of the business fundamentals will prevail in any recovery that follows and will make strong companies survive and the weaker to fail. But, in case of  real estate that was primarily driven by pure speculation and fueled by undisclosed wealth, it's going to be a very long drag for years.

Overseas Indians contributed significantly to this raging bubble and they will be very reluctant to invest in Indian real estate going forward, this will cause significant demand destruction in the near term. The good thing is, hopefully land could be acquired by both businesses and house holds for immediate purposes rather than speculation at reasonable prices, and this leads to a healthy economy in the long run. Speculation is inevitable in future in some form and is just human nature , but it's going to be whole lot different than speculating with black money.

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