Why property prices will rise

Foreign funds have pumped in about $ 16 billion into Indian stock markets this year. After the negative inflows last year, the FII investments are reaching the peak 2007 levels. The stock markets are reaching for the stratosphere and valuations are defying the stock fundamentals. Meaning today's valuations are way ahead of earnings.

The next asset class in the scheme of things of global fund houses after speculation in gold this year, is likely to be property. With banks slush with funds and no incremental domestic demand, liquidity in the banking system is high. We expect that land prices will rise in the coming months as a result of money flow into the system. Meaning, land rates are likely to be at inflated levels, and the excess committed by the builders and the banks in the previous cycle could very well return soon. In the fast changing global economic environment, business cycles, which earlier used to last for about 5-7 years are likely to get shorter to 2-5 years.