Safeguarding Goa's Real Estate Market from the Bubble Burst
An economic bubble typically occurs when an asset's price soars past its intrinsic value, driven primarily by speculation rather than fundamentals. While elevated prices can persist for extended periods, they eventually correct when reality sets in, leading to a rapid price contraction or 'bursting of the bubble.' Goa has been going through a real estate upsurge in recent times, and while prices might have hit a plateau in some areas, artificial means have largely kept the bubble from bursting.
Free markets usually do not tolerate asset bubbles for too long, but India does not operate as freely as we are led to believe. One of the biggest problems Goa faces is the significant involvement of politicians, either directly or indirectly, in the real estate market. Politicians often hold large tracts of land in their portfolios and use their influence to pick up land at low prices before major development projects are announced in the vicinity. Changing zoning laws is another tactic they use to make quick profits. With so much at stake, politicians will do everything in their power to keep the real estate bubble from bursting. Therefore, expecting changes in laws to bring sanity to the real estate market is unrealistic.
There are two main groups targeting Goa’s real estate. The first group consists of individuals who are looking to escape the 'hellholes' they currently reside in other parts of the country. When on vacation in Goa, they are drawn to the contented way of life, better infrastructure, and active communities, which remind them of developed countries. Buying real estate in Goa seems straightforward—just sign the cheque and move in. Since one property sale in their current location can buy larger spaces in Goa, the allure is strong.
The second group comprises corporate raiders who gradually infiltrate established communities, initially making polite inroads while maintaining good relations with local politicians. Their ultimate goal is to displace the local population from their common spaces and make these areas exclusive for their guests. Local communities are often placated with sponsorships for events, and politicians are given free access to properties, with the costs covered by the businesses. This arrangement mirrors how the underworld operates, demanding protection money to ensure smooth business operations. Can any starred hotel claim they have never entertained a politician for free?
Both scenarios point to a common outcome: if drastic measures are not taken soon, there will be no place left for Goans in Goa. Whether it's retail Indians or the corporate sector, the majority of properties will be cornered, altering the Goan way of life and sounding the death knell for Goa. If the real estate bubble is artificially sustained until this point, it will inevitably burst, with or without government intervention, once the Goan way of life is replaced.
To curb individual speculators from driving up Goa’s real estate prices, the government should pass laws imposing a 50-year lock-in period on real estate transactions. This means any new property purchased cannot be sold or transferred to a new owner for a minimum of fifty years. Such a measure will attract only genuinely interested buyers who believe in Goa's long-term potential. Even some Indian celebrities have behaved more like speculators, using Goa to buy and sell real estate easily and pocket the profits.
The government's revenue collection from real estate transactions has also contributed to the problem. The more properties change hands, the more revenue is generated. However, the government must take decisive action to create genuine barriers in real estate trading to curb speculation. Otherwise, Goa risks becoming a tradable commodity rather than a home. The corporate sector, despite professional advice, should recognize the signs of a bubble. A little downturn in business and they quickly lobby the government, indicating their uncertainty about revenue streams. If revenues are so precarious, why is there so much private tourism capacity being added? A 50-year lock-in period will force businesses to develop long-term plans rather than operate as fly-by-night operators. This will also allow Goa’s infrastructure to keep pace with growth in the sector.
A significant price boom in a short span of time will undoubtedly create a bubble, and the biggest losers will be Goans who are forced to purchase properties at exorbitant prices, only to find their value drop during a downturn. If the opposition wants to win elections, they should include this proposal in their manifesto. If not, it will be clear that their intentions are to maintain the status quo. The central government has already taken action to protect Indians from harmful speculative markets, such as the crypto market and online gambling. A 50-year lock-in on Goa’s real estate purchases might just save us from a bad ending.
