- One of the key economic development verticals is real estate that would greatly provide fillip to the country’s key growth indicators. Why? Simply because infrastructural development always plays a significant role in not only providing employment opportunities to the labour communities but also act as an excellent indicator to gauge where economy is headed. Little wonder, every country lays tremendous emphasis on ensuing real estate sector takes off and sustains on expected lines. The wider ramifications associated with the real estate’s robustness has direct consequences on the nation’s GDP would be vouched by the finance experts.
PC: Bloomberg.com
- The moot point to ponder over here is there is also a need and necessity to ensure construction activities, especially residential and commercial, does not scale up more than the demand from the ground. Take for instance how China’s real estate boom went kaput on the back of construction boom turned out to be counterproductive leading to unsold inventory. What such a situation ensures is a cascading effect on the economy’s envisaged growth prospects by severely denting the sector’s vibrancy. Needless to mention, the government and the builders making the real estate sector should be mindful of this fact before embarking on an expansion spree. Sometimes when people build too much without thinking, things to wrong.
PC: Quill Group
- As mentioned above, this is what happened in China with a company called Evergrande. It borrowed a huge amount of money (about $300 billion) and quickly became the biggest builder in the country. For a while, everything looked great – the man at the helm even became the richest in Asia. But here’s the problem: Evergrande and other builders kept making more and more houses, even when people didn’t need them. China ended up with empty apartments – enough to house three times its population! Many would say it’s akin to being suicidal and digging up own grave. Eventually, the company couldn’t pay back its loans. The housing market crashed, prices fell, and people lost jobs.
PC: Times Property
- Consequently, China’s economy slowed down as well. What’s the lesson for India from China’s challenges on this front? As you are aware, real estate (houses and buildings) is a smaller part of India’s economy. But already, big cities have over a million unsold homes, many of them super expensive. New towers are being built, but lots of apartments stay dark at night because nobody lives there. If India keeps building homes that people can’t afford, the same kind of bubble could burst here too. And when bubbles burst, it hurts everyone – families, workers, and the economy. One of the noteworthy takeaways from the situation is simple. Build what people need, not just shiny empty towers. Why waste resources?
