Vishal Bhargava is a real estate influencer. A month back, he issued a warning about Gurugram real estate being a house of cards.

 Anyone with a basic grasp of supply and demand would recognise that real estate in Gurugram – and in many other parts of the country – has morphed into a financial asset, meant less for living in and more for flipping at the earliest opportunity. In that sense, Bhargava was saying something that made a lot of sense, irrespective of whether you agreed with him or not.

Real estate as an investment had been in cold storage from around 2013 and 2014, up until the Covid pandemic broke out. After that, it took off – particularly premium and super-premium real estate.

Ultimately, real estate stopped being something people bought to live in and became something they bought to sell at the first opportunity – turning homes into financial assets, much like stocks. Sure, some speculation is natural in any healthy market – but when speculation becomes the market, that’s when trouble begins.

In fact, in Gurugram, a lot of real estate is bought and sold in the pay-as-you-go form: This lets real estate investors pay in installments as the apartment is being built. Now, almost no one wants to pay all the installments and own the apartment to live in it. They want to sell out before that and make a profit.

In that sense, they are trading on the margin, and speculation based on the fear of missing out (FOMO) is the order of the day.

This possibly led to Bhargava calling Gurugram real estate a house of cards. No market can keep working well if largely speculators keep buying and selling to other speculators. It then becomes a game of passing the parcel.

This isn’t a piece about Indian real estate in general – or the Gurugram market in particular – being in a bubble. I have written more than enough on that. In this piece, I wanted to write about something more mundane but very important.

Now, the response to Bhargava’s call by the real estate industry – the brokers, the brokers with podcasts and reels, the consultants, the influencers and the companies (not always on record) – was immediate. And it was loud and clear: Gurugram real estate isn’t in a bubble at all and that it was all set to challenge Mumbai real estate prices.

Indeed, once you adjust for income levels, the real estate prices in Mumbai are perhaps the highest in the world. And a major reason for that lies in the fact that the city is surrounded by the sea, and the fact that the government owns a lot of land, limiting the land available for building newer homes, something that Gurugram doesn’t really struggle with. But let me stay on track and not get away from what I want to say here.

The Indian real estate market, especially in hotspots like Gurugram, has turned into a game of musical chairs – with speculators buying not to live, but to flip. Amidst this frenzy, the only voices being heard are the bullish ones. It's time to ask why – and who benefits from this imbalance.

Outsiders and insiders

The real estate industry, like the stock market, can broadly be divided into two parts: the insiders and the outsiders. This insider-outsider way of thinking was first put forward by the economic historian Charles Kindleberger in this all-time classic Manias, Panics and Crashes.

Insiders are those – individuals and institutions – who work in real estate or the stock market – directly or indirectly – and make money from it. Outsiders are the end customers. In the case of real estate, these are individuals who are buying homes.

When outsiders buy real estate, the insiders sell or help sell. And for insiders to continue to make more money, they need to perpetually keep telling the world at large that real estate prices will only keep going up, and today is the best time to buy as any. 

Or as a Mumbai real estate broker told me nearly a decade and a half back: “Tezi ki hawa bani rehni chahiye (The atmosphere of bullishness should be continuously maintained).” And there are phases, when the insiders are right for years at end, as has been the case since 2020 or as they were from around 2004 to 2012.

In the case of Indian real estate, any communication that appears in the media – mainstream or digital – is dominated by these insiders.

The real estate consultants – who largely make money from the real estate companies or from some of the bigger investors in real estate – keep telling us almost every week how bullish the market is.

A new breed of real estate brokers who have turned themselves into influencers never miss a chance to say that all is well.

Then there are real estate influencers who keep plugging new projects being built by real estate companies and keep creating a perpetual FOMO amongst those who do not own a home and live on rent. Like financial influencers, they rarely bother to tell us whether they are being paid to say what they are saying.

On top of all this sit the real estate lobbies and companies that keep repeating the bullishness given half a chance. Companies also incentivise the larger real estate brokers to push unsold homes in newer projects rather than older homes, which had been sold to investors in the past and have been lying locked and unsold.

Now, we all tend to do what is best for us. Given this, there is really no point in cribbing about how insiders operate, as long as their dealings are fair and transparent.

So, what’s really the issue here? The issue is that only the bullish point of view gets communicated over and over again by the insiders to the outsiders.

Take the case of the stock market; those in the business of managing other people’s money (OPM), that’s the insiders, largely do the same. Nonetheless, there are enough and more people who contradict the all-time bullishness being projected by the insiders.

Indeed, there are even some insiders in the stock market who, from time to time, choose to go against the prevailing mainstream thinking. Of course, whether the outsiders – the retail investors and other investors – choose to listen to such people is a choice they make.

The point I am trying to make is that in the nearly two decades of writing on this subject, I have rarely come across anything negative being written on real estate. Even during bear runs, such writing has been rare.

Why is that the case?

There simply isn’t enough publicly available data going around on Indian real estate to keep coming up with regular analyses, which goes against the perpetually bullish argument being offered by the insiders. And as far as the mainstream media is concerned, if they keep speaking to the insiders, as they tend to do, they will only sell eternal optimism.

So, what kind of data is needed to present a real state of India’s unreal real estate?

1) The number of home registrations that happen in the top 10 cities during the course of a month. Now, these figures are available at the state government level and the municipal level. In fact, stories using such data do appear in the media, particularly when home sales are up. But there is no regular data across cities that is available to make sense of the real estate sector as a whole.

2) The number of new homes that real estate companies are promising to build during a particular month. With the Real Estate Regulatory Authorities being set up across states, something like this should be possible in many cities.

3) Some sort of rental index needs to be constructed. This will help in gauging rental increases across India in general and in the largest cities in particular.

4) Regular estimates of unsold homes and locked homes need to be published. Income tax data should help with this. Of course, given the amount of black money floating around in real estate, it won’t give a complete picture of things, but will be a good start nonetheless.

5) The Reserve Bank of India (RBI) needs to publish the number of housing loans given out by banks and non-banking finance companies, across price points and different cities, on a monthly basis. This should not be very difficult to compile, given that the RBI collates a lot of data from banks.

6) The difference between the market prices and the circle rates across cities could also be collated and published.

7) Finally and most importantly, India needs a proper monthly house price index. Of course, given the illiquidity of real estate as an investment, it’s not possible to come up with a daily index like is the case with the stock market.

Currently, the RBI’s All India House Price Index is published every three months and with a considerable lag. There has to be a free and fair assessment of which way housing prices are going on the whole, which is not possible as of now.

Now, none of this is going to be easy to get up and running on a regular basis. And given that, this sort of a project needs to be carried out by one of the think tanks run by the Union government.

Over the long term, this will help in building a much more realistic thinking around the idea of owning real estate just for the sake of owning it.

Indeed, runaway home prices do not help a developing country like India. Expensive homes – while helping the insiders of real estate and large real estate investors – hurt everyone else who really do not have a collective voice that can be heard.

People are unable to buy affordable homes to live in. Builders do not want to build affordable homes. Many of those who buy homes to live in spend a lot of money on paying home loan EMIs and end up with significantly lower savings, with their lives being one financial emergency away from a difficult situation. Their quality of life suffers.

A few keep buying homes for the sake of buying them and then keep them locked, and thus create a shortage. Further, there are significant unseen effects both for corporations and the government.

India urgently needs transparent and regular real estate data – across home registrations, rentals, unsold inventory, housing prices and housing loans. Without this, the market remains dominated by insiders pushing a one-sided perpetual optimism.

Affordable homes remain a mirage, and real buyers pay the price. For a healthy housing ecosystem, India must move from hype to honesty – where price, value and need come together, simply because unchecked optimism only helps a few, but harms the many.

Vivek Kaul is an economic commentator and writer.

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