No it is not a good time to invest in real estate in India.
In the first decade of 21st century(2000-2010) the Indian housing sector was NOT in a bubble territory. Property prices were increasing hand in hand with real demand(we will get to that later) and annual salary increments. However the second decade(2010-2020) is when the Indian real-estate sector started entering bubble territory.
Here are the reasons why:
1. The Ratio. In a developed country people almost always have a high quality of pre-existing infrastructure, such as good roads, a guaranteed supply of water, electricity and gas, a high level of public safety, garbage collection and recycling etc. In such countries the ratio of an average suburban 3BHK house to the single-earner-middle-class take home salary is about 5:1. E.g.($300,000:$60,000)
Whereas in India where none of the above is guaranteed, this same ratio for a 3BHK apartment(NOT a house) hovers around 8:1. E.g.(Rs.60,00,000:Rs.7,50,000). You have to ask yourself how on earth is this even possible?
Note: Do keep in mind these are only examples, but you get my point.
2. Supply and Demand - Flawed. People throw around this argument almost in every single real-estate related discussion as if this argument can never go wrong. But the fact is that the supply and demand argument is completely flawed in India where the demand is created artificially. Here is how it roughly works. The builders acquires land from a local politician or mafia and guarantees him 30% of the flats as a payment for the land. Other stakeholders involved with the project, including the builder's family and friends are allotted another 30% of the flats. Which they sell AFTER the pre-launch so as to make profit. The remaining 40% flats are sold by the builder himself and soon as he sells out he puts up the "sold-out" tag.
Now the remaining 60% flats trickle down very gradually via the "brokers" over next 5-6 years after pre-launch(during the construction phase) and many of them even remain unoccupied because of lack of buyers. This phenomenon is very visible in Mumbai and Bangalore.
3. Ponzi scheme Most Indian builders are in severe debt and to pay their installments they launch NEW and attractive projects. In short they collect the booking amounts and down-payments from YOU to make THIER monthly payments. This is a classic example of a Ponzi scheme.
These days Indian newspapers are full of property advertisements. So much so that many builders even completely buy out the cover page! Now think for yourself, if thereal demand was so high will there be a need for such extravagant advertisements?
4. Easy loans Seriously don't we ever learn our lessons? Lets be proactive and not repeat the same mistakes as the middle-class americans in 2000-2007. Easy loans and sub-prime mortgage! Ring any bells?
5. RBI warnings Raghuram Rajan recently reduced the real-estate exposure limit to Indian banks from 40% to 25%. In simpler words all banks in India now have to do a minimum of 75% of their transactions in non-realestate sectors.
