Are the rising property prices causing a social divide?

Authored by Sangeet H Kumar
CEO, ACBD Global Asset Corp

There is no denying to the fact that India has quite a high economic disparity (which is prevalent in most of the developing countries in the world) .The rich are getting richer and the poor are getting poorer is cliché’, and very much a reality in the New India. With luxury limited to a privileged few who drive a 7 Series BMW, own a villa in Mauritius, sport a one crore watch, wear a Solitaire and take a holiday to Europe as often as some holiday at a nearby hill station.

With the high property prices seen all across India, sometimes I wonder that added to the above, real-estate is soon becoming responsible for the growing social divide in our country. Coupled with the high property prices, we are witnessing luxurious projects being launched by developers that are obviously expensive. Penthouses and villas, with the best of designs, layouts and features like a private swimming pool have become order of the day.

Especially the middle class are getting crunched and as the property prices keep rising, definitely higher than the incremental income, they are left high and dry. I know a few of my clients who believe that they can never move to a new (read bigger) house. They repent that they could not take the right decision at the right time.

I would like to give a perfect example of 3 brothers who last year sold their family bungalow in a posh suburb of Mumbai. One of them bought a row house in a distant location for a 10% higher price that was prevalent in the market at that time. The client was grumbling that I had sold him an expensive deal. The second brother being a pessimist kept telling me that the market would see a correction and he would rather wait. He moved into a rental house and believed that he had taken a right decision. The third brother who lives in the US invested part of the money in business and now is in the process of picking up a new house.

In just a period of 12 to 14 months the row house today is worth 30 to 40% more than the purchase price. The brother, who believed that the property prices would fall, is still living in a rented house. (I just hope that his wife does not divorce him) The brother in the US is quite a happy man because I believe that the property in the US have taken a beating in the last one year or so.

Though my wife's single demand is that we should soon move to a new apartment, that too a terrace one (perhaps because her brother just bought a 4000 sq.ft. penthouse) I still consider myself privileged as I have a roof above my head.