Mark Twain once famously said ‘Buy land they’re not making it anymore’. While the stock market has emerged as the clear winner among major asset categories for investors in the post liberalization era appreciating more than be 1,300% on an average since mid 1991, property values in cities such as Bangalore that benefited from the reforms and the information technology boom have increased at an even faster pace.
Property and stocks grew at the fastest pace in the post reforms era, with the realty gaining between 450% and 1,400% while gold, when compared to property made modest gains of around 275%. Silver, however, jumped by an impressive 632.5% during the period. As the markets opened up throwing up a lot more opportunities more people lined up to have a share on the lucrative pie.
Emerging property markets (in the early ‘90s) such as Bangalore and Chennai have become fully developed.
Only Delhi and Mumbai made it to the global list of property destinations in the early 90s. But with the reforms cities like Bangalore too have found a place. Growth in these cities came mainly in the past 15 years. Reforms had a big impact on commercial property and rates zoomed on the back of the ever growing demand for space. Exact data on commercial property prices in 1991 was not available but according to a TOI study property consultancies rate have jumped by 400% to 1,400 % depending on the location.
Even as values continued to climb retail participation in stocks and real estate increased manifold in the reforms era thanks in good measure to newer easier options to invest and the availability of finance. In the good old days getting a loan was a tough proposition and one typically worked all life building a corpus and finally bought a house with savings and even retirement benefits. All this has changed in the past decade.
Now one can get personal loans just after landing a proper job. Salaries have increased tremendously and as a result a lot of people are looking at buying even a second house as an investment. The per capita income has more than trebled since 1991 to Rs 44,345 in 2009-10.
Investments in stocks are no different. The average daily turnover at the NSE which accounts for the majority of stock trades has grown more than ten fold in the past seven years alone. The advent of demat accounts and online trading has increased the overall reach of the market. The average daily turnover in the cash segment shot up from a mere Rs 469 crore in 1995-96 to Rs 11, 760 crore in 2006-07. RBI data shows this decade (mid 90s to mid 2000s) reaped the full benefits of liberalization .
Earlier stock trading was done only in certain pockets. But you have a trading terminal in most corners (of the country) now. The reforms played a big role. There were not many institutional (domestic as well as foreign) participation than as only UTI was the primary player. Since then volumes have picked up and have grown by more than 100 times.
Interestingly the reverse link between real estate and stocks vanished in the reform era. In the pre-reforms era whenever the stock markets went up, real estate declined. Ever since foreign institutional investors warmed up to the Indian markets this reverse correlation changed he added.
Real estate prices have increased by an average of 15-20% every year in most places says observers. The national capital region has had a tremendous increase in property development and as a result prices climbed by well in excess of 25%. However, Mumbai has rarely seen a steep decline in all these years, say observers.
Excerpts from ‘The Times of India’