The other day a friend was considering buying a flat for around Rs 70 lakh for investment. He asked around whether he should go ahead with his scheme; the near-unanimous was ‘yes’ because whatever the trials and tribulations faced by the national economy, his investment would certainly appreciate.

Curiously, barring unforeseen circumstances, no one who has ever invested in real estate has ever failed to reap a rich harvest. One reason behind this is the secular increase in demand for land, following the imperative of development, which willy-nilly pushes up prices. A second factor is the diminishing value of money in the public’s hands consequent on the creeping inflation.

Growing economy

But there is a third factor which could have an impact on the resale price of my friend’s flat, about which I could not reach any firm conclusion. This is the rate of growth of the economy in the next couple of years. The higher the pace of overall growth, the greater would be the increase in general demand, which would in the normal course lead to more inflation and a higher price for the flat. Admittedly, a concomitant increase in supply would reduce the inflationary pressure. But this is uncertain terrain, more so because of the given infirmities of economic policies pursued by the Centre.

Indeed, nearly every indication as of now points to an even more fractured polity at the Centre in the years ahead, the inference being that Central economic policy will be weak at the best of times and chaotic when the going is bad. It will be argued that this is an unnecessarily gloomy view of the future to adopt and that, in fact, better times are ahead for the nation, especially with the prospect of the Congress party launching a new, younger leadership. This hope is very precious indeed, because if it does not fructify, the country’s leadership landscape would turn particularly barren. In fact, some argue that the replacement of the old with the new in the Congress could bring about a severe qualitative change in the popular perception of India’s oldest political outfit, the impact of which on the fortunes of the Grand Old Party could be nothing short of tumultuous.

Return guaranteed

To return to our starting point: what sort of price escalation could my friend expect from the flat which he is considering buying today? Excluding national economic growth from the canvas, he would still find an appreciation in the flat’s monetary value, the real value of which would of course depend on the rate of inflation in the period between purchase and sale. Indeed, even if there were a return to the Hindu rate of growth of yesteryear (an unrealistic prognosis), there would still be a handsome return on the flat — that is, if the builders did not get enmeshed in some scam or the other which could delay completion of the flat itself.

Come to think of it, while prospects of GDP growth are unclear given the attendant political uncertainties, there are no such doubts on the secular increase in corruption. To some political parties — and not merely the Aam Aadmi Party — this would be excellent fodder, leading to greater political uncertainty with its debilitating impact on economic growth.

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