As for the property bubble, several stock market scams have occurred in India, based on false statements to banks about the financial strength of the borrowers who used the money for stock market speculation.
Similarly, a property should not triple in value in less than ten years, unless it is in a prime location, and also the same property should not go more than 5x in twenty years.
After that, the area will go out of fashion, and thirty years on, the price growth will be in line with the average..
What seems to be the issue here is that a lot of extra money is in a frenzy state, for high short term gains, which really does not happen in real estate.
Money which might be deployed in the bond or stock markets is being diverted to property, and high appreciation is expected in a short time.
Also, interest only loans are not prudent, the banks will not get their capital back to deploy elsewhere.
In India, the interest rates are in the 6.5 to 7% range per year, 10% to be paid at least by the buyer, for 15 year tenures. Shorter tenure attract more interest.
The loan amount is generally based on fair market value based on rates decided by the government, and recent transactions.
While some valuations have been found faulty, this is generally a fairly robust system.
Our property valuations are about 100x monthly rental, but in some areas 50x.
So the decision by tenants to buy property may be based on a perceived saving in the long term, and of course most prices appreciate by the time the loan is paid off.
This frenzy might just be a result of catching up, as things were on hold during the pandemic.
You might do well to look at the same property valuations in 2002, 2012 and 2022.
That would give a more sober idea of price trends.
Another factor is that the materials used for construction have gone very expensive...steel is almost double in two years...and wood, don't even ask!
