Indian real estate’s ‘Never-Burst’ bubble: Financial advisor explains the paradox

India’s housing market faces a striking demand–supply mismatch. While millions of urban families aspire to own a home, especially in metros like Mumbai, Delhi, and Bengaluru, the supply of affordable housing remains limited. Developers often prioritise luxury or high-ticket projects, leaving middle-class buyers priced out. This imbalance means demand is sustained at the top end of the market, while genuine end-user affordability continues to erode.

In a detailed post on X (formerly Twitter), Chartered Accountant Nitin Kaushik broke down why India’s real estate market continues to defy conventional economics, despite low affordability and poor rental yields.

Kaushik began with a striking comparison: “In Mumbai, an average 2BHK costs around ₹2 crore, while average family income is about ₹25 lakh a year. That’s an 8x price-to-income ratio — same as London. But unlike London, salaries in India don’t rise with inflation, mortgage structures are inflexible, and rental yields barely touch 2%.” 

Yet, despite these imbalances, property prices don’t fall. Kaushik outlined four key reasons behind this phenomenon: 

1. Black Money Cushion: A significant portion of real estate transactions still involves unaccounted cash, which cushions prices from the realities of affordability. Even if salaried buyers can’t afford homes, “investment demand” keeps the market buoyant. 

2. Cultural Obsession with Owning a Home: Home ownership in India remains deeply emotional. Families often stretch beyond economics — dipping into parents’ savings, gold sales, or informal loans — to secure a property. 

3. Limited Supply in Prime Areas: In cities like Mumbai, Delhi, and Bengaluru, developers rarely slash prices. Instead, they delay launches, ensuring that scarcity keeps valuations elevated. 

4. Easy Credit and Low Default Rates: Banks seldom resort to aggressive foreclosures, and loan restructuring is common. This soft approach prevents distress sales, keeping price corrections at bay. 

Kaushik warned, however, that this unusual resilience could turn dangerous: “When salaries lag far behind property prices, home ownership shifts from a necessity to a speculative game. Real buyers aren’t first-timers but those parking money.” 

For individual investors, this means rental yields rarely cover EMIs, making price appreciation the only hope for returns. If that slows, real estate could underperform safer assets. 

Kaushik concluded, “Indian real estate isn’t immune to correction — it’s just shielded by unique demand factors. The day salaries, credit, and liquidity dry up together, the story will change. Till then, prices will keep defying logic.”