Resist real estate mania

The Chinese real estate meltdown has lessons for us

- AJAY SHAH

Many people are fascinated by investing in real estate. The typical middle-class dream is to buy three houses: One to live in, one for a child, and one as an investment. Land enthusiasts say "the thing about investing in land is that they aren't making any".

The case for land investment, however, is a bit dubious. There aren't enough people in India to use the land area. If we generously assume each individual uses 100 square metres totally (across residential and commercial), the land required for the full population of 1.4 billion people is 4.2 per cent of the Indian land area. There are not enough people in the country to utilise the enormity of India even when we have budgeted a total land use of 4,600 square feet per family of four and a floor space index of only one.

Most adults in India were taught about the problem of excessive population growth in their childhood. But there has been a sea change in Indian fertility. The total fertility rate (TFR) has dropped from six in 1964 to two in 2022. We do not know enough about the sources of this decline to make projections, but something remarkable is afoot. At every stage in India's history, the demographic transition has happened at a bigger pace than projected. The southern states have TFRs lower than Germany's. We should say: The thing about investing in land is that they aren't making enough people.