It does not take too much of an analysis to conclude that the assets in India, especially the real estate were grossly overpriced. However, here's some analysis to prove the point.
In order to buy a humble 2-bedroom abode with small sized rooms, one has to shell out Rs. 10-15 million in the suburbs of Mumbai. The closer you go to the city, the price goes up even further. This in a city with miserable infrastructure, connectivity and chaotic quality of life. It takes just a breakdown in the railway signalling system to bring the entire city to a stand-still! When the rupee was priced at 45 to a dollar, this humble abode translated to approximately USD 225,000 to USD 335,000. For that kind of money, you could have bought a palace in a city in US with much better connectivity, infrastructure and a peaceful quality of life. The facilities like free county library, public parks, etc come as a bonus.
Something had to correct to right-size the real estate in India. Now the rupee is undergoing a sharp devaluation. At Rs 55 to a dollar, how does the same apartment price in dollar terms? It now comes for a price tag of about $180,000 to $270,000. Still expensive but we are getting there - where we belong. A complete right-sizing is yet to happen. It can take shape in either of the three ways - A bloodbath in the real estate market, an even sharper devaluation of Indian Rupee or both.
In order to buy a humble 2-bedroom abode with small sized rooms, one has to shell out Rs. 10-15 million in the suburbs of Mumbai. The closer you go to the city, the price goes up even further. This in a city with miserable infrastructure, connectivity and chaotic quality of life. It takes just a breakdown in the railway signalling system to bring the entire city to a stand-still! When the rupee was priced at 45 to a dollar, this humble abode translated to approximately USD 225,000 to USD 335,000. For that kind of money, you could have bought a palace in a city in US with much better connectivity, infrastructure and a peaceful quality of life. The facilities like free county library, public parks, etc come as a bonus.
Something had to correct to right-size the real estate in India. Now the rupee is undergoing a sharp devaluation. At Rs 55 to a dollar, how does the same apartment price in dollar terms? It now comes for a price tag of about $180,000 to $270,000. Still expensive but we are getting there - where we belong. A complete right-sizing is yet to happen. It can take shape in either of the three ways - A bloodbath in the real estate market, an even sharper devaluation of Indian Rupee or both.
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