Prof. Jayanth R. Varma’s Financial Markets Blog

A blog on financial markets and their regulation

Land as an asset

The doyen of Indian housing finance, Deepak Parekh is today quoted
as saying that land is no longer an asset (“There
is no need for irrational pessimism
”, Business
Standard,
November 7, 2008). Parekh says “Land prices
have collapsed, land is no longer an asset – people don’t
want land as a security. Today, there is surplus land, low demand
… the value of land is probably half of what it was …”

This explains why real estate companies reportedly have to pay 35%
interest after providing collateral (land) notionally equal to three
times the value of the loan.

Another interesting statement in this context is in a speech
by Fed Governor Kevin Warsh (hat tip Calculated
Risk
) “We are witnessing a fundamental reassessment of the
value of virtually every asset everywhere in the world.”

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: