Why does India have a housing glut and shortage at the same time?
In a recent interview to The Indian Express, G. Hari Babu, national president of National Real Estate Development Council (Naredco)—a real estate industry association—shared some interesting data: “There are 1.14 crore flats lying vacant in India. These are being bought as investment opportunities." This is not the first time such a comment has been made.
In 2015, Anshuman Magazine, then chairman and managing director of CBRE South Asia, a real estate consultant, had said: “Despite a housing shortage, around 1.02 crore completed houses are also lying vacant across urban India." Now, contrast this with other data points. Recently, Kotak Institutional Equities, a stock brokerage, said that in 2023-24 residential real estate sales stood at 1.1 billion sq ft, 20% higher than 2022-23. Further, property consultant Anarock pointed out that home prices in the top seven cities have gone up 13% per year in the last two financial years.
So, what explains the dichotomy of so many locked flats along with robust growth in home sales and prices? More than 10 million locked flats signals a glut. But a 13% price rise signals good demand and thus a shortage of homes. How do a glut and a shortage co-exist? First, many individuals like the idea of investing in real estate because it’s a physical asset, which they can touch, see and feel.
The same cannot be said about financial assets. Second, conspicuous consumption is at work when it comes to buying real estate for investment. The wealthy need to look wealthy.
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