Financial Booms and Busts!

Parmeet Shah

The Long-Run Equilibrium Lens for Spotting Real Estate Bubbles

The equilibrium theory posits that markets tend toward equilibrium and that any apparent uctuations are merely random noise. It contends that prices in a market reect the underlying supply and demand fundamentals, which are in turn not affected by the price. However, the theory struggles to explain business cycles; it is clear that time and again some markets experience reexive dynamics - phenomena where the price not only reects supply and demand, but also affects the demand in a selfreinforcing pattern, where increases in prices lead to increase in demand, which further increases prices and so on. George Soros, an investor and business magnate, in his book The New Paradigm for Financial Markets, argues that different principles apply in markets depending on whether they are in a near to equilibrium or a far from equilibrium state, the latter being characterized by reexive dynamics. Is it possible to detect such a departure from equilibrium in its early stages? Can an equilibrium be observed in the rst place? This paper aims to address this challenge for real estate markets with a focus on the United States and India. I will explore rst whether there is in fact an equilibrium that can be discerned, and if this is the case then can reexive episodes be identied. The ultimate objective is to develop a framework for spotting bubbles in real estate markets before they burst by looking at them as departures from an underlying equilibrium.

Is there an equilibrium in real estate markets? If reexivity is a characteristic of the market departing from its equilibrium state, we must rst establish what this equilibrium is. Equilibrium is a fundamental concept in
1

Financial Booms and Busts!

Parmeet Shah

economic theory, but can it be observed empirically in real estate markets? Karl Case and Robert Shiller have devised the Case-Shiller index, which seems to be the longest series of home prices for any country 1. The following chart depicts Shillers data, which is corrected for ination, through 2012 (1890=100).
200

150

100

50 1890 1903 1916 1929 1942 1955 1968 1981 1994 2007 2020

Real Prices
Analyzing the chart leads to some very interesting insights. Home prices in the US have not signicantly increased in real terms for the last 120 years. Also, real home prices seem to have a strong tendency to return to their 1890 level. Shiller released the second edition of Irrational Exuberance in 2005, at which point the data depicts, in his words, a rocket taking off2. Shiller does express concern over the long-run stability of home prices but refrains from explicitly stating that this may be a bubble, after all the period after World War II had seen a substantial rise in
1 2

Shiller, Robert J. Irrational exuberance. Crown Business, 2006: pp 13 Shiller, Robert J. Irrational exuberance. Crown Business, 2006: pp 13

Financial Booms and Busts!

Parmeet Shah

real prices without any subsequent drop. However, Standard and Poors continue to collect data for the Case-Shiller index to this day. The chart depicted above reects data through till the second quarter of 2012. The picture is much more clear at this point - the period since 1998 has seen the largest rise in real prices in the observable history of the US Housing market, but the crash since 2007 has been as dramatic and ultimately brought the real prices back to their 1998 level. The chart adds tremendous support to Shillers hypothesis that real prices in the US Housing market are essentially trendless in the long run and tend to toward their 1890 level. Is such an observation limited to the US housing market? Perhaps some of key aspects that are unique to the US context allow for such a long-run tendency - for instance very good road and air connectivity across the nation, proactive regulatory environment, free market fundamentals, size of the country, etc. This does not appear to be the case however, because a similar pattern is seen in the housing prices of some other countries as well. The real prices of homes in Norway, Netherlands and the US are presented in the following chart3 (1890=100):

Shiller, Robert J. Understanding recent trends in house prices and home ownership. No. w13553. National Bureau of Economic Research, 2007: pp 44

Financial Booms and Busts!

Parmeet Shah

400
Real Home Price Index, 1890=100

350 300 250 200 150 100 50 0 1890 USA Norway Netherlands

1910

1930

1950 Year

1970

1990

2010

Before 1990, the home prices in all three countries do not show to any uptrend or Figure 4. Home price indices deflated for consumer prices and rescaled 1890=100, Netherlands, Norway and USA. The Netherlands index (semi-annual 1890-1973 then downtrend a 100 is year period. happened after 1990 is clearlyit a annualover 1974-2004) produced by What Piet Eichholtz of Maastricht University; is reexive for the Herengracht region of Amsterdam 1900-1973, which he updated to 2004 using other data dynamic as city discussed earlier. The The Norway paper was written in is 2007 and Bank does series not show the for the of Amsterdam. index (annual) a Norges (Eitrheim and Erlandsen, http://www.norges-bank.no/Pages/Article____42332.aspx) 1890-2003 complete picture, and unfortunately data collection for the Norway and Netherlands updated to 2006 and deflated by Harold Magnus Andreassen of First Securities ASA, Oslo. The USA index (annual 1890-2007) is from Robert Shiller, Irrational Exuberance, indices ceased in 2003 and 2004 respectively. The pattern for the most part has been Princeton, 2005, updated using the S&P/Case-Shiller National Home Price Index for the United States. common for the three nations, and evidence supports the assumption that home prices in Norway and Netherlands, along with those of many other nations in the world, went through a similar trajectory as those of the US over the last decade 4. It may be safe to conclude that an equilibrium does exist in housing markets around the world such that the real price does not change substantially over the long run.

Cohen, Jeffrey P., Cletus C. Coughlin, and David A. Lopez. "The boom and bust of US housing prices from various geographic perspectives." Federal Reserve Bank of St. Louis Review 94.5 (2012): 341-67.

44

Financial Booms and Busts!

Parmeet Shah

Why might this be? How do the market dynamics allow for the real prices to behave in such a manner? Lets consider some fundamental factors that determine the supply-demand dynamics in real estate markets.

Supply and Demand Fundamentals in Real Estate Existence of a long run equilibrium implies that there are demand side and supply side pressures on the real price such that an equilibrium is maintained at the macro level, except when reexive dynamics enter the picture. What are these pressures and how do they manifests themselves in the market? Shiller alludes to a number of factors that make the real estate market efcient, but many of his assumptions are questionable. Mobility: Shiller argues that people and business will, if home prices are high enough, move far away, even leaving an area completely 5. Land may be scarce locally, but urban land area is only 2.6% of the total land area in the United States6. Because there is abundant space at the macro level, if prices increase substantially people will nd cheaper locations to live. This argument, however, may be expecting too high a degree of rationality and awareness when it comes to the home buyers. Consumption of homes is different from consumption of other goods given that there is a lot of prestige and emotional value that people attach to their homes and localities. The location of your home determines to a large extent the kind of social circles you will engage with, the neighborhood your children will grow in and the school they will attend. These

5 6

Shiller, Robert J. Irrational exuberance. Crown Business, 2006: pp 22 Shiller, Robert J. Irrational exuberance. Crown Business, 2006: pp 22

Financial Booms and Busts!

Parmeet Shah

aspects are intangible, but consumers must factor them in when it comes to their willingness to pay. Thus, home buyers may be willing to pay much more than what would seem rational and such anecdotes are not uncommon. Shiller contends that the prestige one derives from simply living in a glamorous city is not very signicant7 but without evidence to support such an argument, it can be qualied only as an opinion that is quite contentious. Intangibles are a big part of the equation when it comes to home buying, and as incomes increase across the world, people may be willing to pay an increasing amount for these intangibles and that might drive the price higher. Given the intangibles that come along with buying a home, and also the fact that the common man buys a home only a few times in his lifetime, the real estate markets may not be as efcient as Shiller supposes. Easing land restrictions: Increasing prices put pressure on the government to ease restrictions on land in terms of how much can be built in a particular amount of land and also the amount of land available for development. There is a lot of evidence to this effect and it has even happened recently in New York8 and Mumbai9 . However, it is not that governments in democratic countries like US and India are directly responsible when it comes to maintaining prices and keeping homes affordable. Moreover, changes in regulations are not quick reactions to markets - they usually take a lot of time and the actual development of real estate as a reaction to regulatory

7 8 9

Shiller, Robert J. Irrational exuberance. Crown Business, 2006: pp 24 http://therealdeal.com/blog/tag/oor-area-ratio/

http://articles.timesondia.indiatimes.com/2012-07-02/mumbai/32508038_1_fsi-town-planning-act-maharashtraregional

Financial Booms and Busts!

Parmeet Shah

changes would take even more time. Some have argued that such delays in reaction given the nature of the real estate industry may contribute to boom-bust dynamics 10 11 . Technology Improvements: Construction technology, as is the case with any technology, has improved considerably making home building cheaper and faster. This puts downward pressure on home prices12. However, in the glamour cities that are most susceptible to bubbles, the land prices comprise an overwhelming proportion of the cost so the downward pressure of construction technology may be negligible. The fundamental forces that would result in an efcient real estate market are questionable. On the other hand, when real prices are aggregated across cities, suburbs and states of the United States and evaluated over a very long term the skewness that any inefciencies may cause would diminish in signicance. After all, affordability is an overwhelming factor when it comes to the majority of the home-buying decisions - prestige-buying may be limited to glamour cities and further to the very top socio-economic strata. Land regulations may not ease the upward pressure on prices quick enough in urban areas, but clearly, land is not a scarce resource at the national level. An understanding of the fundamentals of the market is critical to the discussion of an equilibrium. However, any amount of post-hoc debate or justication does not undermine the empirical fact that housing prices do seem to tend to a long-run equilibrium. The argument remains that if at some point in the future real estate prices
10

Mankiw, N. Gregory, and David N. Weil. "The baby boom, the baby bust, and the housing market." Regional Science and Urban Economics 19.2 (1989): 253-254.
11

Malpezzi, Stephen, and Susan M. Wachter. "The role of speculation in real estate cycles." Journal of Real Estate Literature 13.2 (2005): 141-164.
12

Shiller, Robert J. Irrational exuberance. Crown Business, 2006: 22

Financial Booms and Busts!

Parmeet Shah

fail to exhibit the kind of pattern they have shown in the last 120 years, it will be because of the inherent inefciencies and intangibles that come with home buying. For now it is safe to assume that any signicant and consistent uptrend from this long run equilibrium indicates a reexive dynamic. Based on such a hypothesis, we could create a framework to detect bubbles in their early stages. But where does one draw the line to distinguish random uctuations from reexive bubbles? How can we actually deliver a verdict? We will now analyze the graph that was initially presented and look at historical cases to develop a framework for thinking about bubbles in the real estate market.

Historical Trends and Bubbles If the long-run equilibrium is a reliable indicator of reexive dynamics, that must hold historically as well. While home prices uctuated around the long term equilibrium level between 1890 and 1912, the period from 1912 to 1946 saw the greatest drop in real prices as seen below.
200

150

100

50 1890 1903 1916 1929 1942 1955

8

1968

1981

1994

2007

2020

Financial Booms and Busts!

Parmeet Shah

During this period the real prices reached all time lows: a 34% drop from the 1890 level in 1921 and a 32% drop in 1942. The start of the decline roughly corresponds with the start of World War I, which was followed by the Great Inuenza Pandemic of 1918, the Great Depression (1930) and nally World War II. By no measure can this era be considered normal times - each of the events alluded to had tremendous socioeconomic impact for which there is no parallel. In any case, real prices were consistently below par during this period. Could this have been anticipated? Probably not. Can something similar happen in the future? The black swan theory implores us to not discount such a possibility. However, they did end up more or less exactly at the 1890 level by 1948-49. The period from 1953-1977 presents another mystery as prices remained higher than the 1890 level though they gradually declined over the 25 year period. Shiller offers a number of reasons why this was an optimistic time in American history: end of World War II, beginning of the Baby Boom and the GI Bill or Rights (1944) that subsidized home purchases13. He also claims that the scars of the Great Depression deected any speculative tendencies. Remarkably, at the end of this period the prices were again very close to their 1890 level. An interesting realization that comes from the analysis is that real estate booms and busts at the national scale are a relatively modern phenomena as they do not seem to have occurred before 197514. Might it be that the advent of communication

13 14

Shiller, Robert J. Irrational exuberance. Crown Business, 2006: pp 15

Shiller, Robert J. Understanding recent trends in house prices and home ownership. No. w13553. National Bureau of Economic Research, 2007: pp 23

Financial Booms and Busts!

Parmeet Shah

technology is what made the prices across the country highly interdependent? Communication technology may indeed have a role to play - Shiller claims that reexive excitement can cross vast oceans15. Reexive dynamics of the boom-bust type seem to have started from the late 70s. Three such episodes are clearly evident:
200

3
175

150

125

1
100 1970 1974 1978 1983

1987

1991

1995

1999

2004

2008

2012

This is where the study of real estate booms and busts in the US really begins. The approach from here on will be to examine the similarities between these bubbles. The most contentious element of the analysis is to declare the start and end of a bubble. With a bit of tinkering, I could nd that if we arbitrarily make the following assumptions in dening the start and end of the 3 bubbles, we get some interesting properties: An 8% consistent rise in real prices over 2 years marks the start of a bubble. A consistent and signicant rise in prices without any downward pressure implies a

15

Shiller, Robert J. Irrational exuberance. Crown Business, 2006: pp 17

10

Financial Booms and Busts!

Parmeet Shah

reexive dynamic in principle. Drawing the line in terms of hard numbers will inherently be arbitrary in nature, but such a denition would predict all of the 3 bubbles in discussion. When prices decline to reach within 2% of the price at the start of the bubble, the bubble has ended. Such an interpretation aims to delineate reexive dynamics from the equilibrium. The average price in a period between two bubbles is where the equilibrium lies for that period. In the graph, the shaded regions depict bubbles, and the gaps between them reect the equilibrium. The following table summarizes some of the key characteristics of the 3 bubbles: Bubble 1 2 3 Bubble 1 2 3 Start 1976.125 1985.125 1997.125 Peak Timing 0.46 0.5 ? Peak 1979.125 1989.625 2006.125 End 1982.625 1994.125 ? Length (yrs) 6.5 9 ?

Preceding Equilibrium 104.4 105.2 108.3

The key conclusions one can make from this analysis are - rst, the bubbles are more or less symmetric. Second, the preceding equilibrium, which is the average price within the gaps in the gure, has increased very slightly over the last 40 years. If one

11

Financial Booms and Busts!

Parmeet Shah

were to extrapolate both these characteristics and apply it to the current period, he would conclude that the bubble has ended or is about to end: Applying the peak timing of 0.46-0.5, the end of the bubble lies between 2011 and late 2014. Assuming the equilibrium prices will increase at their historical rates, the equilibrium price at the end of the bubble will be around 113. The Case-Shiller index prices declined to 113.9 in the rst quarter of 2012, but are back up to 120. What does this say about the prices in the future? The direction, of course, is impossible to predict. But what we can say is that the equilibrium seems to be around the 110-115 price points. If it goes much lower than this, it is likely to bounce back quickly and if it goes much higher than this, then we are seeing the rst signs of another reexive dynamic. Such an approach to evaluating and extrapolating from historical patterns is inherently arbitrary and contentious. First, we have only 3 substantial cases within merely one country. Will this be applicable to countries around the world and various different indices? Moreover, will this be applicable to bubbles in the future? In defense of the approach, home price data is surprisingly scarce and the Case-Shiller index seems to be the most complete, holistic and updated index that is available. The understanding and perspective that can be gained from it is unparalleled, without which a long-run hypothesis would hardly be possible. As evident in a previous chart, occurrence of bubbles across the globe seems to be a coordinated phenomenon. The specic numbers and metrics developed in this section will need to be re-calibrated if applied to a different country or index. The approach may still be highly relevant. And

12

Financial Booms and Busts!

Parmeet Shah

perhaps the approach is more of a lens or a way of looking for bubbles rather than a strict indicator.

Inferences from the Analysis of Historical Bubbles One interesting realization is that bubbles in the US Housing market are not a short term phenomena and are even increasing in length. The bubbles we analyzed lasted 6, 9 and (arguably) 13 years respectively. A very intriguing characteristic of each of the three bubbles is that they are more or less symmetric. Again the key reason for this may boil down to the nature of real estate development. A relevant visualization of how this may occur is Mansharamanis epidemic lens that utilizes a concept called infection rate when it comes to understanding reexive dynamics. Applying it to the real estate context, one can imagine that the ascent of the bubble is when more and more buyers get infected by the speculative atmosphere. The peak is when the market runs out of greater fools implying a very high infection rate. The intriguing part is why the rate declines at a similar and steady rate rather than dropping drastically. One possible explanation is on the supply side - the most cash strapped and leveraged developers are forced to drop rates to support their cash ow. This causes the prices to drop, which puts even more developers in the same situation and the cycle continues till developers in the strongest position also cannot sustain high prices. However, this theory requires consumer demand to be consistently high - for if consumers decided to play the waiting game in anticipation of prices to keep falling, then the crash would be much more swift as

13

Financial Booms and Busts!

Parmeet Shah

demand would suddenly evaporate and developers across the industry would face a severe cash crunch due to a lack of transactions. Yet another interesting realization is that real prices have shown a number of uptrends but have not shown any downtrend that takes them signicantly below the equilibrium level, at least for the last 60 years. One can imagine that all the ambitious forecasts of the peaks would result in signicant ghost towns and vacant real estate, creating a temporary over-supply situation that would crash the price below the long-run equilibrium. High demand pressures may, again, be the key explanation to this observed phenomena. Given rising incomes and rising aspirations regarding standards of living, consumers are not willing to wait too long and are even willing to pay a premium in order to move now. Perhaps the intangibles like more prestigious communities and better schools that were discussed previously matter enough to keep the demand consistently high. Waiting a few years for the prices to decline when your childs schooling and career is being affected may not be rational after all. For the majority of the last forty years, the US Housing market has been in a boom-bust dynamic. The ability to spot reexive dynamics in the market could not be more relevant than it is in the modern era.

The Indian Context

The National Housing Bank, which is an institution owned by the Reserve Bank of India has created an index of nominal home prices starting from 2000 called Residex. I have compiled all the available data - for Mumbai, Kolkata, Bengaluru and Delhi up until

14

Financial Booms and Busts!

Parmeet Shah

2006 and the top 15 Indian cities from 2006 through to 2012 and corrected it for ination using the CPI16 , borrowing from the methodology of the Case-Shiller index. When the data from India is incorporated into Shillers graph (2001 = 130), this is the picture we get:
300

225

150

75

0 2000 2001 2003 2004 2006 2007 2008 2010 2011 2013 2014

The rise in real prices of homes in India since 2001 has been phenomenal and towers the rise in prices in the US. This is not unprecedented - in a previous chart we saw that real prices of homes in Norway and Netherlands also rose much more in proportion to US prices. This may be due to the nature of the market, or even the way in which the index is created. The graph seems to reect the reality - anecdotal evidence suggests that prices of homes in Mumbai have risen 5-6 times in nominal terms since 2003 17 and CPI has only

16 17

Appendix I Appendix - II

15

Financial Booms and Busts!

Parmeet Shah

doubled over the same period 18. Also real prices had more than doubled over the period of 1990-200019 at least in Mumbai. At the fundamental level, the economy in India is comparable to that of the US. The growth rates in India have been much higher than those of the US for the last 20 years, but then so has ination, which has been corrected for. The real estate market in India is highly competitive and open, so one cant imagine any mechanism that would distort the price. There are vast expanses of unused and unoccupied land, even close to the big metros like Mumbai, Delhi, Kolkata, etc. So shouldnt rapidly increasing prices be offset by a decrease in demand and an increase in supply? Well, not if reexive dynamics are at play. If we have another look at the graph, the Indian market did go through a downward blip when the US market tanked, but it soon recovered and since 2010 the prices have soared above the peak of 2007. Again, anecdotal evidence suggests that this does reect the reality on ground 20, and isnt a mere skew in the data. Might it be that the Indian market entered yet another boom before it could complete its decline? There are three possible explanations for why the Indian data does not look similar to the US data. The rst is that real prices of homes in India do not tend to a long term equilibrium. One could argue that per capita income has risen almost three times in India when it has risen only 22% in the US in real terms over the last two decades. But over a 120 year period, the income per capita in the US rose eight times in real terms, without any corresponding increase in real prices of home. Real home prices in the US
18 19 20

Appendix - I Appendix III - Ready Reckoner Data Appendix - II

16

Financial Booms and Busts!

Parmeet Shah

have been resilient to many structural and technological changes and have had a strong tendency to the long-run equilibrium. There is no signicant reason why the same would not be true of Indian home prices. The second explanation is that there is something wrong with the data. This is indeed plausible and in his paper Malcolm Athaide highlights a number of concerns regarding the quality of Residex - the most critical ones being some of the historical data is based on recall rather than actual transactions and that black money is involved in many transactions21 . However, none of the factors seem to indicate a consistent ination of the prices and given that it is the only home price index available for India and is devised by premier institutions in India who set up a technical advisory group for the development of the index22, Residex is the most reliable and best available data. Moreover, the data seems to reect anecdotal evidence and is in accordance with the intuition of developers on the ground in Mumbai23 . The third explanation is in line with the hypothesis - the increase in real prices of homes implies a reexive dynamic is in effect. The price rise post 2010 depicts that yet another bubble is developing or that the decline in prices has not corresponded to that in the US and will come soon. If we were to extrapolate from the patterns seen in the US we could say that when the price decline occurs, it will happen in a gradual manner symmetrical to the pattern in which the price had risen. Also, the price will come back to the preceding equilibrium level as dened earlier, which seems to be at most half of the current level in real terms.
21 22 23

Athaide, Malcolm (2008), The Robustness of Residex as a House Price Index, XLRI Jamshedhpur: 23-29 Athaide, Malcolm (2008), The Robustness of Residex as a House Price Index, XLRI Jamshedhpur: 31, 20 Appendix - II

17

Financial Booms and Busts!

Parmeet Shah

Concluding Thoughts The approach developed in this paper can prove to be a reliable lens for spotting bubbles in their early stages in real estate markets around the world. Such an understanding could have a profound effect not only on how real estate professionals and rms view price movements in the market but also on how the banking and nancial sector looks at real estate loans and collaterals. One hopes that such a macro level perspective abates many of the misconceptions people across the globe seem to have when it comes to real estate, and hopefully even prevent large scale bubbles from occurring.

18

Financial Booms and Busts!

Parmeet Shah

Appendix - I
Residex Data & CPI
20012002 2003 2004 2005 2006 2007 2008 2009 2009 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 2012 2013 Hyderaba d Faridabad Patna Ahmedab ad Chennai Jaipur Lucknow Pune Surat Kochi Bhopal Kolkata Mumbai Bengalur u Delhi Average CPI 42 49 55.7 63.7 75.1 75.9 37 43 49.3 55.6 66.4 83.6 32 42 54.3 71.6 87.9 86.9 34 36 43.3 50.3 67.4 90.3 36 42 50.6 60.3 74.2 84.2 100 104 108 112 117 123 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 131 96 100 103 106 104 119 103 101 101 106 139 114 112 73 124 107 137 92 121 100 100 95 115 102 97 98 95 151 140 117 76 130 109 146 65 139 107 127 120 71 104 103 111 90 139 162 124 58 121 109 150 81 145 119 128 143 63 119 117 123 83 162 185 126 59 113 118 165 81 154 127 113 164 66 112 124 109 79 158 165 134 64 106 117 171 82 152 124 131 183 61 133 135 136 83 153 176 160 68 110 126 172 87 170 148 141 210 63 148 140 128 97 166 191 167 74 115 136 178 87 176 146 164 214 69 152 141 133 101 173 213 173 101 123 144 183 83 165 146 165 218 67 157 148 128 86 167 211 175 88 126 142 186 91 220 146 169 248 64 160 150 149 107 224 194 181 92 147 156 187 84 206 141 163 271 65 154 169 139 97 208 191 194 93 154 155 195 79 218 140 167 296 64 165 184 152 82 211 190 193 100 167 161 198 86 217 129 164 304 80 164 181 144 72 204 191 190 92 168 159 199 85 217 140 174 309 78 171 200 145 73 207 196 197 100 172 164 206 84 216 138 180 312 85 175 201 138 80 206 191 198 98 178 165 214

Average Real Prices in India (corrected for ination)

Average For US 100 130 112 146 129 168 148 193 175 227 189 245 211 273 215 279 205 266 202 262 197 256 189 246 202 262 211 274 218 283 211 274 230 299 220 286 224 290 220 286 220 285 213 277

Residex data was collected from NHBs ofcial website: http://www.nhb.org.in/Press%20Release/ Quarterly_Update_April_June_2011.php The information before 2007 is available on the websites but is hard to navigate to, one can simply type .xls in the search function of the website to retrieve city-wise le with the data. All Residex data was rescaled to 2007 = 100; then to 2001 = 11 when deated by CPI (Average) and then 2001 = 130 (For US) for the chart that compares US and India home prices. CPI Data was collected from the Labour Bureau (http://labourbureau.nic.in/ indtab.html) and rescaled to 2007 = 100.

19

Financial Booms and Busts!

Parmeet Shah

Appendix - II
Anecdotal evidence from the Mumbai Market

This annexure depicts the anecdotal evidence that has been used in this paper under The Indian Context. They reect the information I have collected through conference calls with my father, uncle (MD and Vice-Chairman of Marathon Group, respectively) and a few other developers from Mumbai. They also include some of my rst hand experiences when I was working at Marathon Group from 2009-2012. The following is a list of projects in different parts of Mumbai, rates are approximate and in Rs. / square foot.

Project Name Marathon Era Monte Vista

Location Lower Parel Mulund

2003 6000 -

2007 30000 9000

2009 22000 6000

2012 33000 13000

20

Financial Booms and Busts!

Parmeet Shah

Appendix - III
Data from Ready Reckoner, a government body under the Revenue ministry. The prices are in nominal terms and are available for specic localities in Mumbai from 1990-2000. Presenting a sample page from the publication:

21