It’s an overvalued property market

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Updated: August 12, 2016 12:08:11 PM

While half of India’s household savings are invested in physical assets such as real estate, rental yields in the country’s property...

While half of India’s household savings are invested in physical assets such as real estate, rental yields in the country’s property market have remained low at just 2% compared to other Asian peers. More than a tenth of financial savings are held in the form of currency and only 55% are diverted to the banking system. Lower rental yields — the rate of return over the cost of the property — indicate the overvaluation of this asset class. In a fairly priced real estate market, rental yields should be closer to the cost of borrowing.

 

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