N Sundaresha Subramanian: The pin is ready, bring on the bubble

The unraveling of politico-realty-corporate nexus may finally make Mother Earth buyable

Everybody wants me to buy a house. “Before prices rise further, you should buy one,” says a relative. “You will get something for Rs 60-70 lakh in the Manesar belt,” a colleague recommends. But for none of them, not buying a house and staying on rent is an option.

On top of this there is peer pressure from people who take multi-crore loans and buy flats little bigger than the kitchen back home and put pictures of it on facebook.

But for several years now, I have been holding such suggestions out for the simple reason that realty is overpriced and being a cyclical market, it is bound to come down at which point I may consider buying.

I always fancied the fabled “For every bubble, a pin awaits” theory of Warren Buffett.

No amount of persuasion and demonstration effect of $$-signs glittering in the eyes of house buyers could change my position.  But, thanks to what my friend Arjun Parthasarathy, Editor, investorsareidiots.com told me last week, finally I feel the time has come to put away some money to buy property. 

Not because someone is giving me loans, not because the price will go up ten years from now, but because we may soon get small a window to buy the asset and not a loan. The only and right way in which every asset should be bought—cheap.

The most speculative of realty markets in Delhi, Mumbai and to some extent the Southern markets in Andhra and Tamil Nadu are finding themselves in the centre of political storms. According to Parthasarathy, this could eventually lead to a crack. I am only too happy to believe this theory. I have waited for long. And the tell tale signs are all over the country. 

In Tamil Nadu, the ruling AIADMK has been cracking down on former DMK legislators and ministers accusing them of landgrabbing. Durai Dayanidhi, son of Union Fertilisers minister MK Azhagiri is on the run for alleged involvement in granite mining in Madurai district.

In Andhra, YS Jaganmohan Reddy is behind bars. Reddy’s interest has spanned media, mining and granite, but he is also said to be a major player in Andhra real estate.

And then comes the big two, Mumbai-Pune belt in Maharashtra and the capital region comprising Delhi, Haryana and Uttar Pradesh.
With the famous sons-in-law facing music in these regions, officials have even started demanding that such middlemen are expunged from the system, my hunch is that there is going to be a significant winding down of positions. DLF, Lavasa troubles are not going to go away in a hurry.

Another politically connected realty player Sahara is also facing court orders which may force it to wind down at least some of its prime holdings in Mumbai-Pune belt and in Gurgaon-Noida.

With potential corporate buyers also in trouble, this selling may also drive down the prices. 

Only, problem in the bubble-meeting-pin theory is the government.  Will it allow the natural cycle to play out and allow the market to crash or are the stakes too high?