Home is where the heart is!

Who doesn't want to buy their own house and tick off one of the goals from their bucket list? But Housing in India is expensive. Your dream of creating your abode is at stake due to the skyrocketing prices of the properties, high rate of interest, and inflation in the rate of taxes.

The Rising Cost of Housing in India

According to a recent report by the Confederation of Real Estate Developers Association of India, the price of a property goes up to ₹11K/sq. ft in the major 8 big cities of India. In metro cities like Mumbai, and Bangalore the average cost of housing exceeds 1 crore which is unaffordable for most middle-class Indians.

Suppose you want to buy a 1BKH property, the average cost would be ₹44 lakhs. For a common man, purchasing such a property would require approximately 11 years of their average income, based on the price-to-income ratio.

The most recent Census data, from 2011, shows that 17% of Indian urban households reside in slums. The situation is particularly worse in India's larger cities, where slums are home to 41% of households in Greater Mumbai, 30% in Kolkata, and 29% in Chennai. Although successive governments have attempted to solve the issue, housing affordability is still a question.

However, from 2021 to 2024, the income rate of households across the major cities of India increased at a compound rate of 5.4%, but property prices surged 9.3% in this gap, which has made the properties unaffordable for buyers.

Why Are Property Prices Rising?

As people are migrating from rural to urban areas, the population is growing rapidly, and so is the demand for better living is surging. That is why the prices of residential infrastructure are also increasing. According to research reports from CSEP and the Indian Infrastructure Report 2023, the land use policies implemented by the government are not authentic, they are flawed. As a result, land that is available in urban areas is not used efficiently for building residential infrastructure. The developments could not be done properly due to insufficient urban planning despite of availability of land.

From purchasing land to securing building licenses, developers frequently find themselves forced to "grease the palms" of officials at various points in time. Property prices are inflated as a result of this illegal spending being passed on to buyers. An anonymous developer stated:

If the total construction cost of my group housing project is Rs. 10 crore, the actual cost of the project is about Rs. 6 crore to Rs. 7 crore. This means Rs. 3 crore to Rs. 4 crore has to be earmarked to bribe some government officials.

Additionally, fluctuations in interest rates influence borrowing costs, affecting both demand and property prices.

The head of HDFC, the biggest mortgage lender in India, Deepak Parekh, has been outspoken about how corruption lowers real estate values. He asserted that property prices could decrease by up to 20% if corruption were effectively addressed. He mentioned:

Some regulatory body should be in place so that people should be worried that if they do anything wrong, they can be penalized or blacklisted. Today, there is no such fear for anyone.

How Corruption Fuels Housing Inflation?

Now imagine a corrupt man earns 10 crores but evades 40% tax by investing in real estate. Since black money can’t go into banks or stocks, he buys 8 homes from a builder, paying only 30% in white money. He pays tax on just 20% of 20 lacs, saving 14 lacs in taxes. Seeing high demand, the builder hikes prices by 25 lacs. Now, a common man faces inflated prices—1.25 crores plus 20% GST, making it 1.5 crores. Corruption leads to artificial demand, raising real estate costs and making homes unaffordable for the honest taxpayer.

Foreign Investment & Artificial Demand

Critics also argued rising property prices are a result of NRI demand which can create artificial bubbles and make the market unstable.

A user on X commented:

So the real estate lobby is too strong in India and works closely with the ministers. So this will never happen. All govt has to do to solve this mess is levy extra TDS if you have more than 3 residential properties and an extra 10% stamp duty if you're NRI. But this won't happen. Govt would rather spend time on Latent.

Solutions for Reform

Customers have found it difficult to obtain precise information on property ownership, legal status, and market trends due to this lack of transparency. Because of the inflation in real estate prices caused by corruption, honest taxpayers cannot buy homes. I believe, stricter financial laws, online transactions, and real-time tax monitoring can stop the transaction of black money. The government needs to surveillance builders who take black money and impose full-white real estate transactions. Encouraging digital payments and simplifying tax laws will deter evasion. We can create a fair housing market where hardworking citizens aren’t burdened by rising costs by imposing transparency and accountability.

#HousingMarket #RealEstateIndia #HomeBuying #PropertyInvestment #DreamHome