Real Estate Crisis: Damodaran Warns of Overvaluation in India's Housing Market
Valuation expert Aswath Damodaran cautions that India's real estate market is overvalued and poses significant risks for middle-class investors.
Real EstateOvervaluationAswath DamodaranIndian MarketInvestment RisksReal EstateSep 08, 2025
In a podcast with NDTV, Damodaran didn’t mince words about the dilemma facing domestic investors. “If Indian stocks are overvalued, what exactly are you going to do? You’re going to buy Indian real estate, which is even more overvalued in many ways?” he asked.
Damodaran has long criticized India’s property market as speculative and disconnected from fundamentals. Despite surging valuations — the sector grew to $482 billion in 2024 and is projected to more than double by 2030 — he argues that cultural preferences, poor regulatory enforcement, and unsustainable investor demand have distorted prices.
Rental yields in major cities remain among the lowest globally, a red flag in Damodaran’s view. “Prices are not being set by utility or cash flow,” he’s said previously, “but by belief and inertia.”
Affordability data supports his skepticism. In Mumbai, households spend up to 48% of their income on housing. Meanwhile, average residential prices rose 6.5% in 2025 and are projected to jump another 7.5% in 2026. The fastest-growing segment? Luxury homes priced between ₹1–3 crore — now nearly half of all sales.
While regulatory reforms like RERA have improved transparency, Damodaran argues they haven’t reined in the market’s momentum. Office leasing hit a record 79 million sq. ft. in 2024, and FY2025 investment topped $6.99 billion, but fundamentals still lag.
As investors pile into new asset classes like REITs and data centers, Damodaran’s warning is stark: “There is no easy place for [Indians] to put their money.”
Frequently Asked Questions
What is the main concern Aswath Damodaran has about India's real estate market?
Aswath Damodaran is concerned that India's real estate market is overvalued and disconnected from fundamentals, posing significant risks for investors.
How do rental yields in Indian cities compare globally?
Rental yields in major Indian cities are among the lowest globally, which is a red flag according to Damodaran.
What is the projected growth of India's real estate market by 2030?
The real estate sector in India is projected to more than double in value by 2030, growing from $482 billion in 2024.
What is the impact of high real estate prices on household budgets in Mumbai?
In Mumbai, households spend up to 48% of their income on housing, highlighting the affordability crisis.
How have regulatory reforms like RERA affected the real estate market?
While RERA has improved transparency, it hasn't significantly reined in the market's momentum or addressed fundamental issues.
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