Are Skyrocketing of Real Estate Prices and Constructions a Sign of Development ?

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It is been heard from many people recently that Hyderabad has developed a lot since few decades. To be fair, there has been a lot of physical constructions that have been seen in the recent past in outskirts of Hyderabad. But the key question is – Are these skyrocketing of real estate prices and constructions in the outskirts represent a real development?

If we examine this critically, we start seeing that this definition of development is not good. It could be a wrong indicator.

Skyrocketing of real estate prices by creating ‘fake’ development

Bureaucrats and cronies with big land banks are creating a boom and increasing the prices of land they own in the outskirts to make profits. Like priming a pump, they deliberately construct some landmark to give a semblance of progress like a petrol pump, an international school, an engineering college based on the budget and the land holding of the person. Sometimes, multiple investors do that and then work the real estate brokers to spread the word of real or bogus new roads, offices etc and increase the prices of the area. They hold on to the prime properties on the main roads and sell of the ones away from the road. It is a ‘created’ development, not a real development and once the land is sold, development stops by the realtors. Then the buyers have to develop the outskirts to hold property or there is no development for several years.

Construction driven model of development has seen many global failures

Construction driven model of development has failed very badly globally, most notably in Dubai, Las Vegas and China. China is probably the most aggressive in the use of construction driven development that has not had the desired positive impact and led to massive wastage of investments. In Dubai, the same construction driven development was funded by 80-90% of them being speculative investors. Very few of these investors had intention to live there or work there.

The unsustainable city – Daultabad: How Tuglak moved the capital from Delhi and paid a price
These are not isolated instances even in medieval history of India, there was Delhi’s Sultan Tuglak who moved capital from Delhi to Daultabad (near Aurangabad) for 2 years before water shortage made him realize his mistake and led him to go back to Delhi. In the process, the city of Delhi got destroyed and did not recover for nearly a century.

“Ghost Cities” of China – End result of construction driven development

You can check for all the failures by searching on google for ‘ghost cities of China’ you will get news reports from Wall Street Journal, CBS 60 minutes, and San Francisco Chronicle. We would recommend you watch the video of CBS 60 minutes to see how crazy it is. They built it because the planning commission of China has ordered the construction of the cities to maintain GDP growth rates. But now, many are predicting that these ghost cities will be malices in China’s development and results in collapse like in US in 2008.

Influence of China’s construction driven model of development in Hyderabad

Many of the outskirts developments have been inspired by visits to China by our many of our influential people. In 2008 in Hyderabad, many office and residential buildings in the outskirts were incomplete for many years due to lack of buyers. Even if they were fully constructed, nobody was there to live in the flats, villas or independent houses. Many new areas have 100% of owners as “investors”, that means nobody lives there. Only people have land, house or flat there.

Like our experiments with planned economy model inspired by Soviet Union caused the 1991 economic crisis, shortly after the fall of Soviet Union between 1989 to 1991. We may see the construction driven model of development also will cause much turmoil in the future.

Construction in outskirts looks much bigger because of relative comparison

Relatively, the new construction in a sparsely developed area looks huge. Just recollect, while travelling in train or plane across undeveloped areas, out of nowhere you see a factory in night. It looks big with all the lights. It looks bigger because it is in a remote place.

Similarly, every real estate project elevation does not show any building either on the side or behind the proposed construction. The construction looks good only if you remove the neighbouring construction. Same happens with outskirts, the development looks bigger than it is. Same development in city cannot be fully seen because from every angle the construction is covered by another construction.

Real estate prices will automatically rise once there is sustainable development. But not all rises in real estate indicate sustainable development!

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