What Binds Real Estate Issues Of India And China?

The nature of difficulties posed by real estate to authorities in China and India are completely different. To tackle their respective problems, while the former is seen putting in place strict measures to cool property prices and the rising demand, the latter is busy doing all it can to bring buyers back to the market. 

According to a PropTiger DataLabs report for the second quarter of the financial year 2016-17, home sales across nine major cities of the country declined one per cent from the previous quarter. This decline hit the sector despite the Central government rolling out several measures to give a push to property sales. Property markets across India have been facing hard times for the past couple of years. 

On the other hand, in its attempt to fight the housing bubble that is threatening to burst anytime now, the Chinese government among several other measures has limited the number of properties a couple can own.  As a result, people are seen resorting to twisted innovations — this includes fake divorces — to increase the immoveable assets. 

According to a Bloomberg report: "China's rising property prices this year have been inspiring desperate measures, as frenzied buyers are seeking to act before further regulatory curbs are imposed. While the latest figures show easing in some of the hottest cities such as Beijing and Shanghai, the cost of new homes surged to a seven-year high in September."

“Local governments in at least 21 cities have been introducing property curbs, such as requiring larger down payments and limiting purchases of multiple dwellings in a bid to cool prices,” the report adds.

Now, what is common between the problems the two neighbours face?

At the root cause of their problems lies the tendency to use real estate in driving the economy in different directions. While too much activity in property markets is a sign of unsustainable growth, a slowdown would put brakes on the overall growth in the economy. In their attempt to do it right, authorities often find themselves unable to control the pace. At this juncture, China is trying to avoid a situation that real estate in India is reeling under. 

Sample this. The current slowdown in property markets of Gurgaon, Noida, Bengaluru and Chennai could be attributed to the unprecedented spike in prices they witnessed in the past. If property prices keep seeing a similar surge in cities of China, the country would soon be grappling with a problem quite like India. The key to the success of their overall economies will lie in how effectively the two nations can utilise their respective real estate sectors to their benefit. This will have to be done in a way where the scope of bubble-building or a downturn is to be kept at bay.