Why are more than 10M homes vacant in India?

[chdir]

For a working class person with no black income (unaccounted/un-taxed), home buying experience has deteriorated in this housing boom. Builders often don't sell you directly. They forward you to a middleman/broker. You are shown the least desirable units as "available" & the rest all sold out (a lie). You are expected to pay a sizable portion of the price as black money (could be as high as 60%). The promised completion date drags on for years. The whole real estate boom is targeted & fueled by black money owners.

Edit: And there are umpteen number of violations of regulations for earthquake, fire safety, building laws. Almost all builders double sell you the common land in the name of "reserved parking", clearly considered illegal by the court.

[cubancigar11]

It is completely true. Actually, most of the problems in India can be traced back to previous generation (current old generation). They:

1) Did the most corruption. It wasn't that bad before it.

2) Created all the draconian laws to 'correct' Indian culture.

3) Put pressure on current generation to 'own a house' at the age of 25-30, while they themselves like all the people before them got their house at the ripe age of 50-60.

4) Themselves a product and participant of socialist government with anti-private business attitude, they increased the age of retirement for government jobs. You meet one government employee and tell him/her that you work for some IT company and they will mock you for 'getting undeserved salaries' and 'being ignorant of bureaucracy', whether it is for getting a passport or driving license.

[vijayr]

Cities like Bangalore are worse (relatively speaking) than Silicon valley. Bad infrastructure, horrible traffic, pollution...and yet, home prices are sky high and out of reach for most Indians. A lot of Indians blame software people for this, and they are partly right. With all the multinationals moving in, the salaries went high and with it the real estate prices. Today, it is so bad that even software people can't afford, unless they are ridiculously highly paid.

That said, outside of the big cities there are still lots of places that are cheap to live - if you don't mind cows, electricity problems, internet problems etc.

[netcan]

This level of reporting is really silly. I'm always surprised how common it is to print a bunch of facts and/or speculations/opinions loosely wrangled together with two-bit economics. It's really insulting to the reader.

Even psychology doesn't get this kind of abuse. Can you imagine an article that lists off divorce rate, some happiness survey, psychiatric drug statistics and ties it all together narratively with a single-sentence theory about 21st century loneliness, stressful work lives, the trouble with living online social lives or anything else that an average tabloid reader might suggest as a reason.

Here we have some suggestion that tax evasion is involved, some stats about housing shortages, slum housing and no information relevant to the obvious question: why do people buy flats and them leave them empty?

Come on BBC.

[eli_gottlieb]

>Can you imagine an article that lists off divorce rate, some happiness survey, psychiatric drug statistics and ties it all together narratively with a single-sentence theory about 21st century loneliness, stressful work lives, the trouble with living online social lives or anything else that an average tabloid reader might suggest as a reason.

Yes, that's pretty normal actually. People even think it's quite intellectual.

[npalli]

I was curious and looked at vacant homes across the world.

So the US has about 13 Million vacant homes (with 1/4th the population of India). [1]

China has anywhere from 69 to 85 million vacant homes (approx. same population as India)

EU has about 11 Million vacant homes (with 40% of the population of India). [3]

I would say a lot more fine grained analysis is required to say if this is a problem or not.

[1] http://www.census.gov/housing/hvs/files/qtr113/q113press.pdf

[2] http://www.theguardian.com/society/2014/feb/23/europe-11m-em...

[chappar]

>>China has anywhere from 69 to 85 million vacant homes (approx. same population as India)

I am not sure I understand this calculation. India's population is more than a billion

[cies]

> Why are more than 10M homes vacant in India?

So why? BBC basically answers with the following: because some people earn more money this way. Tell me something new BBC.

Let me posit another reason: because squatting these empty houses is not allowed.

If squatting these long-term empty places was allowed they would be:

1. sold/rented at a more fair market price,

2. squatted (in which case they are also not empty anymore).

[kang]

These homes have been built in areas with large population and there are severe slum locations nearby. The corruption is huge on these lands.

In some areas even national park and bird sanctuaries have been illegally constructed upon and then the government was bribed.

[golergka]

Well, let's just throw out the whole private property concept while we're at it, why not?

[yalogin]

The main reason is that renting out these houses is not safe at all. Many middle class people fear that the renter will occupy the house and not move out. It happens all too often apparently and given the entirely corrupt law enforcement officials and idiotic laws home owners would rather lock it up than renting.

[netcan]

Why would you buy it then?

[foolinaround]

the major issue not mentioned as to why these homes are vacant is the problem of eviction of tenants.

The laws are so lax that folks often buy property with clean money, and just keep it locked up rather than realizing the rent potential.

The growth in prices has so far ensure that even then, buying and locking up property is lucrative.

[brickcap]

This is very true. I have known tenants who adversely possess the property and make owners fight for decades before they are evicted. Generally as long as the tenant is paying rent there are very few grounds on which he can get evicted.

Most of laws favour the tenants(in one sense it is right) but it is not uncommon for them to take undue advantage. And people who rent without a contract of some sorts usually pay the price. Most of them though would rather prefer to keep it vacant than put it in any danger of dispute.

[seunosewa]

This sounds like the real reason.

[linux_devil]

Investments in property is booming in India . Don't know if it's a bubble or not . But I cannot afford one right now (not even as investment ) , reason its too expensive and loan is not my cup of tea and I think investing same money in your own startup will be worth more ( as experience)

[VLM]

"I think investing same money in ... startup will be worth more"

You are correct on a micro-level but there are also macro-level issues when capital and rent (rent of money) are tied up in non-productive assets. An individual who buys a $1M house cannot put that $1M into a startup, but also on a societal level a bank that loans $100M of mortgages cannot loan that $100M to build infrastructure or a new manufacturing plant or a (large) school. So high price of non-productive assets hurt the macro scale as much or more than it hurts micro scale. Its very bad for the economy when the best thing to do with a pile of money is buy something that doesn't produce anything or grow anything. Its as bad economically as stuffing the money into a mattress.

[th3iedkid]

Very true!

Cost gap across needs vs wants in India seems very much inverted as of today.

I've seen so many people living out of real bad conditions , working hard for earning just enough. But surprisingly they all seem to have good & new smartphones, commute long distances for work and unable to afford a decent sized house![0]

Am not saying its bad for them to own new phones, its atleast a good emotional distraction for them,but reality is only getting tougher for them, day-by-day.

Predatory lending,in india had gotten off fast the last decade .Lots of people have more lots of unpaid credit-card bills.Banks started reporting lots of non-profitable assets.Some of the top private-lenders in india are loosing money by the day.[1]

Value is being eroded of Real estate with both corruption and extortion involved even in remote rural areas! Though there is not much of stats in public domain for above, but [2] is indicative.

[0]:http://www.statista.com/statistics/257048/smartphone-user-pe... [1]:http://dbie.rbi.org.in/OpenDocument/publicOpenDocument.jsp?i... [2]:http://www.thehindu.com/news/cities/chennai/file-detailed-re...

[srathi]

  loan is not my cup of tea

Also, the mortgage rates in India are around 10-14%, compared to the US average of 2-4%.

[somberi]

It helps to think of these "vessels" that conduit black money not as Houses in the strict sense. From a policy planning perspective it helps to remove the errant variable (in this case excess of homes).

[gamekathu]

same situation in US or other "First World" countries - nobody bats an eye, and if in India : "Everyone loses their minds!" Just Saying

[XJOKOLAT]

I would suggest that:

1) It isn't the same situation. The level of corruption and absolute poverty levels are not comparable.

2) Where there are similarities in "first world" countries (e.g. empty housing stock), eyes are very definitely batted. At least in the UK.

3) I would argue that 10 million empty homes in India, where there is significant slum situation, which is basically accepted and regarded as "normal", even in the capital city, is more eyebrow-raising than an empty home situation a "first world" country. I don't actually see anyone losing their minds though.

[philipw]

I'm sure a significant contribution to this are NRI's purchasing from abroad where their earnings abroad give them greater power back home than in the local market. Whilst some people may rent out these properties thus serving that part of the market, others want to hang onto a new build / never lived in property. Some might say this is a form of insurance should they wish to move back, but its most likely just an investment that doesn't serve society.

And yes, this is very similar to investments made in London/New York/San Fran, but wealthy individuals trying to offshore their wealth, although these properties are typically rented out.

[passive]

A quick google says 18.6 million for the US, so I think you're right on to question this.

[kamaal]

This largely because these are high rising apartments on the outskirts of cities, purchased with an intent of renting them out for side income. The net result is there are too many of them. And since they are far away from schools/hospitals/markets and other amenities, nobody really opts for rent in these places. Eventually as the cities grow this may change, but note as time goes your apartment ages too(and so does its value). There is a huge debate whether as to buying an apartment is a better idea or a buying a plot given these circumstances. Every one wants a rent income, very few want the struggle of buying the land, protecting it from encroachers and build it later[which is an circus in itself], most want a ready made flat. Both have their own advantages and disadvantages. Like in all cases good investments are a lot of hardwork and stressful.

Inside the cities houses are always in epic demand. The situation there is totally different.

[aaron695]

As a logic experiment for people in well off countries have a think about what would happen if people built 10 million mansions and left them empty.

Firstly it wouldn't happen even with black money. There's no point having assets you can't use. You're better off just paying the tax and collecting rent.

There'd be a lot of jobs building them.

And the housing market would become cheaper since they have to be sold at some point.

This is a pretty awful BBC, quoting some sort of site, that quotes a Managing Director of a large property constant.

The firm doesn't seem to have produced a report, it seems to be based off an interview, or just a comment of some sort.

https://twitter.com/cbreasia/status/593669907172237312

[xnull2guest]

This reminds me that both India and China are building a huge number of cities all wired up to collect data on everything, so that they can be micromanaged and studied.

Modi promised to build 100 "Smart Cities" - a lot of it with foreign and private investment dollars.

[miji]

yeah, its called system science

[bandrami]

Are they counting the vacant half-built chawls in neighborhoods like Chinchpokli or the dockyards? I'd never seen so many half-completed and abandoned housing projects until I moved to Mumbai.

[kang]

Come to Noida. Advise is you better do not.

[skbohra123]

An article without much substance, just couple of figures and speculations but no deeper study.