Winning back the aam investor
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A recent RBI report had pointed out that in spite of the 2008 global financial meltdown, real estate prices in urban Bihar and UP had actually gone up. Real estate prices in smaller urban pockets are going up rapidly. The velocity of land sale and purchase has also gone up as villagers are selling land and moving closer to the national highways. In my view, a certain level of cumulative liquidity has been embedded in India's growing land transaction market and this is fuelling structurally higher inflation levels as part of the money released from inflated land deals feeds into the demand stream. But this needs to be researched further.
The finance minister must come up with some creative ideas to increase the supply of land on a large scale to mitigate the inflationary expectations fed by land prices. This will require some vision as politicians in India deliberately restrict supply of land to eventually make five to seven times profit while allowing land use change for urbanisation. A tax on vacant land held beyond a period could be a solution. But this will require a self-sacrificing spirit from the political classes. Are they up to it?
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