Friday, February 8, 2008

were you aware? India real estate is carazy

maybe it is a faulty study, but according to one analyst, real estate in India is way more expensive than anywhere in the US, in terms of relative cost for all real estate and in terms of absolute cost for a lot of it.

how does this strike you:
"Condos in New Delhi, India: 2-bedroom, 1000 sq. ft. apartment for $200,000. [$200 per sq ft] (Source:

Condos in Chicago, USA: 2-bedroom, 1000 sq. ft. apartment for $400,000 [$400 per sq ft] (Source: Google Housing)

Now, remember that the median income in Chicago is 50 times more than that of New Delhi."


"Agricultural land in Faridabad, Haryana (adjacent to New Delhi much like New Jersey is to New York): $250,000 per acre (source:

Agricultural land in New Jersey: $12,000 per acre (source: USDA (pdf file), and for comparison its $6,000 per acre in California and $8,000 per acre in Florida)"

real estate in most of the US is overvalued right now by about 25% according to Merril Lynch, but lets pretend it isn't. let's lie to ourselves and pretend that current incomes justify current prices here. let's also pretend that RE across the world follows the same rules. that the median residence should cost about 3-5X median household incomes, the way that they do in the US today. in India today, the median residence costs ($200k from above divided by $2700 GDP/capita from the CIA factbook) 75X median household income.

for reference, if houses cost 75X GDP/capita in the US, the median house would cost $3.3 Million.

sure, India is a rapidly growing economy, but does anyone really believe that they'll move from $2,700/yr incomes to $27,000/yr incomes in the next decade or so? it'd take at least that to begin to justify current real estate prices there.

another interesting factoid from the linked article: New Jersey is more densely populated than India.

i'd be willing to guess that China is in a similar ridiculous real estate speculation situation.

i have no idea how this can possibly be true. if anyone has evidence that it isn't true, i would greatly appreciate seeing it. this worldwide asset speculation worries me.


leila said...

well, then, do most people in india rent? who owns the properties? are the prices so high because india is a discrete country with a very large population (kind of like the netherlands)? has the situation always been this way?

these are some of the questions i have, because, you're right: that is L TO THE DOUBLE OH N Y.

love you,

p.s. thanks for keeping up with the global economy SO THAT I NEVER HAVE TO.

shaun said...

i guess it explains why there are huge shanty towns in New Dehli, anyway

Realty Rider said...

In the absence of reliable data, it has been much more difficult to look for signs of real estate market heating up. India is second fasted growing economy in the world, stock market is booming, unemployment rate is declining and salaries are rising. It is sure way to be unpopular in such healthy economic conditions to say that the real estate market is heading towards a danger zone. Most market reports as well as experts have tried to walk on this tightrope and have maintained a position that the outlook for Indian real estate is good, market may not grow at the same rate as in past and would stabilise. I don’t remember to have seen a report, which says that market would fall.No doubt that the rental outlook for commercial real estate is positive because this is directly linked to the economic performance. The question is whether the price of the real estate (capital values), which buyers are paying, is justified by the rental values. Over the last couple of years the prime yields for commercial properties have substantially reduced meaning that the buyers are paying top dollars for real estate. There was herd behaviour particularly in residential market, supported by low interest rate regime, where individuals bought houses for investment purposes hoping that prices would continue to rise.I have shared a lot more in my