Inflation and Indian Real Estate Sector

For an emerging economy like India, Inflation could be a curse that limits the growth of different sectors which contributes crucially towards GDP. The inflation rates have been running high for the last couple of years this has resulted in rising rates, tightening of liquidity and lowering of aggregate demand. This drop in demand has brought the prices down which intern results in deceleration of growth. This brings about an impact in aspects like unemployment, prosperity of public, reduced supplies etc that upsets general social scenario.

As far as real estate sector is concerned this scenario is reflected in the Mumbai market, there is very limited supply, not due to unavailability of resources but due to escalating property prices making it unaffordable to many inhabitants thereby creating a huge mismatch in demand and supply ratio. Huge capital is blocked due to the refusal of the developers to reduce the property prices, and the prices are so high that it becomes unaffordable to the huge middle class population. This way neither the real estate players nor home buyers are going to benefit. To help Indian Realty sector, other sectors like Banking have to come into picture for reducing the interest rates and providing adequate money to deal with the financial crisis. Indian real estate sector is a supply lead sector, wherein lowering interest rates, providing adequate liquidity to deal with the existing fund crunch and rapid execution creates enough supply to meet demand is a better way to tackle inflation. Other sectors like Textile and Dairy industry have tackled inflation using similar strategies.