Summary of this article
Aswath Damodaran warns Indian real estate is overvalued, driven by cultural beliefs in home ownership rather than utility, with families often spending nearly half their income on mortgage commitments.
Aswath Damodaran, the NYU Stern finance professor, has warned of overvaluation in the Indian real estate sector. Often call Wall Street’s valuation guru, his latest verdict on India offers no comfort for both equities and real estate. Both these sectors are absurdly overvalued, and have left the middle class with “no easy place” to put their money, he said in an interview with NDTV Profit.
According to Damodaran, India’s property market looks impressive on paper. At $482 billion in 2024 and projected to more than double by 2030, the sector is marketed as unstoppable. India’s real estate market boasts of record-breaking office leasing of 79 million sq. ft. last year, $6.99 billion in FY2025 investments, and luxury home sales surging ahead, making it look like the perfect growth story. But the reality is different, he said.
India’s Real Estate Is Overvalued
He says India’s real estate is “even more overvalued” than equities, and is driven less by utility and more by collective belief. Rental yields in Indian metros remain among the lowest globally, and do not justify soaring purchase prices, he said.
“Prices are not being set by utility or cash flow, but by belief and inertia,” he said in the interview.
He further said that average residential prices rose 6.50 per cent in 2025 and are forecast to climb another 7.50 per cent in 2026. What’s moving fastest is not affordable housing but luxury projects priced between Rs 1 crore and Rs 3 crore, now almost half of all sales.
Incidentally, a recent survey by Anarock also shows that 62 per cent of potential buyers are dissatisfied with available affordable options, while 92 per cent are unhappy with their locations. The supposed dream of middle-class homeownership is increasingly out of reach, leaving buyers stretched thin and investors clutching assets that generate paltry income.
Cultural Trap And Risk Factor
Damodaran said that one of the reasons behind the surge in inflated real estate price is the cultural inertia as families continue to see home ownership as the ultimate marker of financial success, even if it means dedicating nearly half of household income to servicing a mortgage, he added.
“Real estate ownership is ingrained in India’s psyche, a safety net for families even when numbers scream otherwise. The same inertia holds in equities: fund managers chase Indian exposure because they cannot afford not to. This collective belief system creates a bubble that refuses to acknowledge fundamentals,” he added.
According to him, the risk of this overvaluation is that emerging markets, including India, carry proportionately higher risks. Investors need to adjust expectations accordingly, demanding greater returns to justify the volatility. Ignoring that equation is, in his view, financial naivety, he added.
What Comes Next
The short-term future looks very complex and paradoxical, according to Damodaran. According to Anarock, housing prices are set to rise 6-7 per cent in 2026, with rents climbing even faster at the rate of 7-10 per cent.
Also with developers focusing on luxury inventory, the affordable segment remains starved of supply. “The country’s most valuable real estate companies are worth a combined Rs 16 lakh crore, a figure larger than Kuwait’s GDP. By sheer scale, the sector looks invincible. Yet the foundations, built on cultural fixation and speculative demand, are fragile,” he added.
In equities, too, global headwinds, including tariff wars, lower globalisation add another layer of uncertainty. But instead of panicking, Damodaran advocates restraint.
“Choose less activity over more activity in the market,” he said, adding that young investors should especially avoid chasing hype or betting everything on a single stock. One catastrophic mistake can erase decades of savings.
His advice is simple: focus on your actual job, grow income steadily, park money in broad index funds, and resist the temptation of constant trading.
