Tarique A Bhat
With every bubble, there has to be an equal opposite burst. We know that the longer a bubble lasts, the more dramatic and severe the burst will be. Nobody believed that the real estate bubble would last as long as it has. Now that our economy is also facing recession impact and the burst of the real estate bubble is quite expected.
The real estate sector has been hard hit worldwide due to the global recession. While this section might be the last to see recovery, Kashmir made an exception to this initially, by being better insulated to weather the financial crisis. Thanks to no Tech and Dotcom bubble. Globalization and economic liberalization remained almost forbidden fruits for us. Our traditional handicrafts, jobs in Gulf and other countries, funding to different Government agencies survived us during the turmoil period. Although the real estate market here remains unorganized, fairly fragmented, mostly characterized by small players with a local presence. Without question, the real estate bubble has also fueled this fragile economy in the last several years. The creation of “short- lived paper millionaires,” was also mostly due to land sale and purchase. In the midst of this land boom and bubble, many people would look at their safe investing options in the real estate of conflict torn region that further propelled the rise up in the land prices and further expanded the bubble. Besides getting into the trap of cozy cars and lavish life styles, land mafias and even real estate agents started investing their money in the stock market. The end result was that most of these spending decisions expired worthless, investors lost millions in the stock market, and the “paper millionaires” were no longer millionaires. Though initially they shrugged off their losses as they saw the value of their real estates skyrocket. Consequently, the rise up in real estate prices allowed them to continue spending and temporarily delayed their downfall. Now that we are already seeing signs of a slowdown in the land and housing market. I believe that 2010 will be the beginning of the burst of the real estate bubble here in Kashmir as well.
The rising real estate prices were purely based on supply and demand. The fact is that the demand of housing is decreasing, while the supply for these homes are constantly increasing. The sad reality is that most people who have purchased homes in the last several years could not afford even the periodic maintenance. The average income has not swelled to the degree that we have seen the real estate market skyrocket. That is why there is a sharp decline in the demand for real estate here.
Many real estate players have grown their portfolio as developers and many small sized players have also entered in this market. It has provided a very high supply of real estate segments either in residential or in commercial space. Different Banks,particularly J & K Bank has also created a very good opportunities for investors to invest and get benefited from this market.
