Lessons from real estate industry: housing market

Abstract

Housing industry, a significant contributor to national output and an important employment generator, has faced sluggish growth for a good part of the decade now. Historically, this industry was known to flout regulations and to harbor corruption and greed. Project mismanagement leading to cost and time overruns aided by increased debt exposure to banking system seems to be the primary culprit. However, this report attempts to dig deeper into industry dynamics and demand characteristics to bring forward the no-so-obvious drivers of the industry behavior. Issues such as the interplay between investors and end users invested in an ongoing project leading to market inefficiency are discussed. Issues such as high cost of approvals adding to the risk of stalling of projects are highlighted. Issues brought out in this report play out very differently across cities thus vastly explaining the disparity between performance of housing markets among Indian cities.