I have often wondered about the reason for real estate price disconnect between India and US. Median house price of 200,000 $ will get you a lousy three bed room flat in India with poor services. Some possible reasons are:
1. Houses in USA are built of wood and last 20-30 years
2. Taxes are high for the services
3. Land is cheap.
4.If Indians took their currency to USA, it would depreciate massively to a level where you would no longer be able to afford a house
There are two issues between India and USA. First house prices in USA are very cheap compared to Japan (where land prices are much higher and quality of construction is very good- for 200,000$ you will get a tiny apartment), England (where land is slightly higher priced, for 200,000 $ you will get a small wooden town house), Germany and rest of Europe (land prices are higher, zoning laws very strict, very good quality houses are built - to survive a tank blast :-), $200,000 will get you a one room apartment, a million dollars will get you a slightly bigger two room apartment). All these countries offer good services and connectivity.
In India we have very high prices. Reasons are
1. Urban land cieling act (raises land price),
2.Agricultural land cant be used for urban land without notification (raises land price)
3. High stamp duty (raises cost of ownership and encourages black transaction
4. Poor law enforcement (increases transaction cost due to legal hassles)
5. Tenancy laws - they are so regressive that nobody wants to build for rental income, especially since law enforcement is so poor. Hence rents are high and house supply is low, increasing house prices
6. Political parties want to peretuate poverty (i.e. Congress). It wants to keep slums as such, so that they are given a Hobson's choice - vote for us and only then we will let you live in this lousy slum, which is illegal, but surviving because we let you be. That is why parties prefer to have reasons 1,2,3 and 5 - they benefit middle class directly. They would benefit the poor indirectly, but poor see their slum home demolition as a direct hit on their livelihood - they are too stupid to know better. They dont know that living in a slum is not their lot in life, with good tenancy laws they can all live in better housing. Politicians get away with it because it IS possible to live in a juggi. In the developed world, you would freeze to death.
7. Extremely poor connectivity. The moment one gets good roads, the prices of houses would plummet because rural land prices are extremely cheap. So that is why politicians dont want roads - their illegally amassed urban property would collapse in value.
It really makes sense for Indians to buy abroad. The moment they realise this there is going to be a likely flight of people and capital
Though it would be one hell of a commute from Delhi to NewYork! :-)
1. Houses in USA are built of wood and last 20-30 years
2. Taxes are high for the services
3. Land is cheap.
4.If Indians took their currency to USA, it would depreciate massively to a level where you would no longer be able to afford a house
There are two issues between India and USA. First house prices in USA are very cheap compared to Japan (where land prices are much higher and quality of construction is very good- for 200,000$ you will get a tiny apartment), England (where land is slightly higher priced, for 200,000 $ you will get a small wooden town house), Germany and rest of Europe (land prices are higher, zoning laws very strict, very good quality houses are built - to survive a tank blast :-), $200,000 will get you a one room apartment, a million dollars will get you a slightly bigger two room apartment). All these countries offer good services and connectivity.
In India we have very high prices. Reasons are
1. Urban land cieling act (raises land price),
2.Agricultural land cant be used for urban land without notification (raises land price)
3. High stamp duty (raises cost of ownership and encourages black transaction
4. Poor law enforcement (increases transaction cost due to legal hassles)
5. Tenancy laws - they are so regressive that nobody wants to build for rental income, especially since law enforcement is so poor. Hence rents are high and house supply is low, increasing house prices
6. Political parties want to peretuate poverty (i.e. Congress). It wants to keep slums as such, so that they are given a Hobson's choice - vote for us and only then we will let you live in this lousy slum, which is illegal, but surviving because we let you be. That is why parties prefer to have reasons 1,2,3 and 5 - they benefit middle class directly. They would benefit the poor indirectly, but poor see their slum home demolition as a direct hit on their livelihood - they are too stupid to know better. They dont know that living in a slum is not their lot in life, with good tenancy laws they can all live in better housing. Politicians get away with it because it IS possible to live in a juggi. In the developed world, you would freeze to death.
7. Extremely poor connectivity. The moment one gets good roads, the prices of houses would plummet because rural land prices are extremely cheap. So that is why politicians dont want roads - their illegally amassed urban property would collapse in value.
It really makes sense for Indians to buy abroad. The moment they realise this there is going to be a likely flight of people and capital
Though it would be one hell of a commute from Delhi to NewYork! :-)
