The housing bubble burst of US in the year 2008 took the entire global economy by storm, leading most of the nations into recession. The after effects of the burst are so adverse that the world still hasn’t recovered from the shocks of 2008. With the prices of real estate going down significantly in India in the recent past, the Indian real estate bubble that has been inflating for over a decade is heading towards a burst and has the potential to dwindle the entire economy and wreak havoc.
What is a real estate bubble?
An increase in the prices of the real estate which is primarily driven by either demand or speculation is followed by an increase in the supply. At this point, in order to profit from the increasing demand and rising prices, the speculators enter the market and put huge amount of money into the system. But since this kind of demand is unsustainable in the long run which either decreases or stagnates, having the same supply, leading to massive drop in prices. This is called as a burst in the bubble.
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Source: The Indian Real Estate Bubble