‘Bengaluru’s real estate market isn’t a bubble, but…’: Redditor disputes slowdown concerns, sets off debate

The Indian real estate market, particularly in Bengaluru, is in the grips of a slowdown. However, it is not a bubble waiting to burst, as some fear, according to a recent post on Reddit.

The concerns about a real estate crash are largely unfounded, as the market dynamics do not exhibit the characteristics of a speculative bubble, the post says.

Understanding the ‘bubble’

A real estate bubble typically involves unchecked lending, inflated property values, and a sudden collapse when borrowers fail to repay their loans. This was the case during the US subprime crisis, where excessive lending led to an artificial price surge that ultimately crashed the market. However, the current slowdown in India does not stem from reckless lending practices or a widespread financial crisis among banks and developers.

The current slowdown in the Indian real estate sector can be attributed to various factors, including the evolving job market and advancements in artificial intelligence (AI). “The slowdown is likely due to factors such as AI advancements and job market instability,” the Reddit user noted. Economic uncertainties, rising interest rates, and a shift in buyer sentiment could also be contributing to the reduced pace of growth.

Minor correction vs market bust

While some market correction may be expected, it is unlikely to lead to a drastic collapse. “In the worst-case scenario, we might see a minor correction with prices growing slowly over the next few years, but this won’t lead to a market bust,” the post explained. Unlike the US housing crisis, the Indian market has not been heavily leveraged, and banks have maintained prudent lending practices.

Yet, the post warrants cautions. A possible exception to the outlook, the Redditor claims, would be the financial downfall of major real estate developers. “The only exception would be if 1-2 major real estate players go bankrupt,” the post pointed out. However, many developers, such as Prestige, continue to undertake large-scale projects without significant financial distress.

Hence, while the Indian real estate sector is experiencing a slowdown, it is far from being in a bubble that is on the verge of bursting. “More severe disruptions would be needed to cause a major impact on the real estate market,” the Reddit post concluded. For now, the market remains stable, with only a gradual correction expected in the near future.

The post sparked a discussion on Reddit with some users even saying they do not see a slowdown. “I don’t even see the slow down around me. Brokers are still quoting exorbitant prices,” a user said.

Another user shared: “Service sector accounts for more than 50% gdp, even a few % decline could affect Bangalore real estate markets. Job market correction will cause the bubbles to burst.”

One user shared that Indian reale state will never “crash” because inflationary pressures do not “affect the rich people the same way they do poor and middle class people”. “Infact, it will have an opposite effect where the rich people will use it as a channel to funnel all their black money and buy as much land & property as possible for dirt cheap prices… The only “market correction” that’s going to happen is that rich people will have a bigger share of prime real estate and will be more closer to establishing a monopoly on it,” the user explained.