Economic real(i)ty

Finance Minister P. Chidambaram has asked public sector banks to prod real estate developers to reduce property prices, which might help revive a slowing economy. A correction in the property market is overdue no doubt, with current prices neither in sync with underlying rental values nor commensurate with affordability levels for normal middle-class home buyers. A simple rule of thumb is to look at the gap between rental incomes from a property and returns from a financial asset of equivalent capital value.

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