Will 2012 be a better year for the Indian property market?

Many people have asked me what the property market holds in store for the residential buyers in this year. My first instinct was to say God Only Knows. And I am not being sarcastic. The Indian property market is unique in that it is surviving despite policy-makers and not because of them. Should our property markets have cooled to the extent that they did in late 2011? I think not. Certainly not when we have the figure of 26 million homes shortage hanging like the sword of Damocles over our heads. Why then did it tank? Demand is robust, right? Yes demand is robust and supply could also be so. But the minute the market starts selling, we have a host of doomsday predictors clamping down on interest rates to "cool the market". The sector is declared high-risk and all project finance too is slowly squeezed out.

So what would I recommend? Why not incentivise the kind of housing that there is demand for, so that the demand remains robust and starts getting met and supply is forced to follow the demand, thanks to creative policy incentives. Let me give a small example. When the housing markets were opened up in 1998 to formal finance, a whole generation of buyers who could not even dream of buying, started hoping to own a house. The lowering interest rates started a flood that eventually turned the Indian property market into the Wind West with investors, punting in the market and making big hauls, like in stock markets. So the investor is the one to be blamed? I don't think so. When the government gave the Section 80 IB (10) incentive to developers to build smaller units, a large number of developers did bite and created a rung of housing that matched what today is fashionably known as affordable housing.

In a study for CREDAI in 2006-2007 where we interviewed over 120 developers across the country, we arrived at the conclusion that low-cost and affordable housing needs to be incentivised,the rest of the segments can take care of itself. Clearly we need to evolve a differential policy structure for low-cost and lifestyle and luxury. I think 2012 could be that watershed year when India may see this change happening. Do you agree? Please comment and discuss because that alone can force the change. The Indian consumer is already in the process of forcing change.

Source: http://blogs.timesofindia.indiatimes.com/A-brick-on-the-wall/entry/will-2012-be-a-better-year-for-the-indian-property-market