When Gujaratis start questioning real estate, it’s time to take notice

The times, they sure are a changin’. I invoke this all-time great hit because I happened to be listening to it recently in the midst of all the chaos of a family wedding.

Waiting for one of the many functions to begin, one of my uncles asked my opinion on an offer he’d just received to sell his apartment in Bandra, a tony suburb of Mumbai. He said he’d be able to buy a similar sized apartment in Thane, just outside city limits, or rent an apartment the same size, in more or less the same area at a fraction of the cost.

Other uncles joined in voicing their opinions. And from everything I heard, I must say I was quite stumped. As background, my extended maternal family (the uncles I refer to here) are as traditional as they get – first generation Gujarati businessmen who believed in property ownership as a pre-requisite to everything, including when looking for a husband for their daughters.

One of the uncles felt selling the Bandra apartment was a great idea, because in the current ‘flat’ real estate market, my other uncle could invest the money he got for his apartment and earn 12% lending it out to fellow businessmen. He could then find an apartment to rent at 2-3% of the value of the apartment.

Another one mentioned he’d held on to a property purchased three years ago that had barely appreciated, and had lost a ‘fortune’ by not using the money better. All this coming from traditional businessmen who’ve always taken immense pride in real estate ownership, above any other asset.

This got me thinking – could the tide finally be turning in favour of financial assets?

People like me have always believed in not over extending one’s EMIs hand over fist for the pride of owning multiple properties. But to see hardcore property buffs questioning the rationale is another matter.

In a market that hasn’t risen and might not anytime soon, Indian mortgage rates are a huge drag on returns. Over the last two years, more than 20,000 users of BigDecisions’ real estate calculators have indicated they expect low, single digit appreciation. Some actually believe they might see depreciation in prices in the near future in markets like Hyderabad. While it’s commonplace to discuss negative real returns on fixed deposits, it’s not often people that Indians question the opportunity costs of home ownership.

I wonder if this is the new normal?

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