Housing boom, a short-term phenomenon: IMF

By Staff
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Google Oneindia News

New Delhi, May 31: Dismissing the fact that housing is the best investment in the long run, which is running on the heels of surge in population and income levels, member of International Monetary Fund (IMF) has termed it as a temporary phenomenon.

''In the long run, housing supply can expand to meet the rise in demand. Over shorter periods, however, demand can spurt ahead of supply, sending prices soaring,'' IMF senior resident representative (Delhi) Joshua Felman said in a conference here today.

This is exactly what is happening in Asia including India now, Mr Felman said, adding that demand has been spurred by a booming global economy, low interest rates, and the development of mortgage financing.

''The boom will not last forever as countries have been dealing with the risks by building prudential cushions in banks,'' he added.

In the long run the solution lies in encouraging new supply and not in controlling demand, Mr Felman said.

Even if housing prices are where they should be, given interest rates and expected income growth, this situation can change, he said.

Interest rates today are at historically low levels, and could rise again. Besides, income growth could slow down, he said.

The residential property market in India constituted almost 75 per cent of the real estate market in terms of value and about 1.2 billion dollars real estate investments are projected to be made by real estate venture capital funds in the current fiscal, Knight Frank India Executive Director (North) Maj Gen (Retd) Jayant Varma said.

He said there exists scope for setting up over 400 residential townships during the next five years in tier II and tier II towns.


UNI

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