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A country s economic performance has direct repercussions on the dynamics of various markets, especially real estate. Over the last few years, various economic issues have declined the overall demand, specifically in the residential sector. Absorption rates have stagnated, causing high levels of overhang across all major cities, with Mumbai being the worst hit. Customers are waiting for a more profitable scenario, whereas developers largely remain in wait and watch mode without lowering prices. Interestingly, this decrease in demand has not lead to decrease in prices, which is otherwise suggested by the micro economic theory of price demand and supply.
Keywords: Indian Real Estate, Demand-Supply Curve, Indian Metro City; Mumbai, Microeconomics, Prices.
INTRODUCTION
It s a warm Sunday afternoon, and Mr. Goel is enjoying a nice cup of tea, in his plush South Bombay Villa. A real estate regulator by profession, it is not very often that he has such free time in hand. Skimming through today s Economic times, an article on current real estate scenario catches his attention which reminds him of one of his most challenging and unique ongoing case that rejected a well-established theory. This peculiar case was presented to him by Mr. Mahesh, head of M&M Developers, Mumbai. He remembers Mr. Mahesh being a strong hold person who came seeking advice for a business problem.
Mahesh is a 50 year old business head of a successful construction company. In his long spanning career the pace of development of real estate in India has jumped leaps and bounds, successfully luring the foreign investors on top of the domestic investors, reasons being the large population base, rising income level and rapid urbanization. He has witnessed the metamorphosis of real estate from being unorganized to a charismatic, industrious and systematic sector. The regulatory policies have been contributory in envisioning the need for infrastructure development to establish better standards of living for the people [1].
He is optimistic that the sector would grow further in near future due to huge number of Non-Resident Indian (NRI) investments. In his recent reads of an industrial survey conducted, a 35% increase in enquiries related to NRI investments with property dealers was noted. Also, attractive valuations have led to the advancement in Private Equity funding. The survey...