The recent global economic crisis has not left the India real estate sector unscathed. After experiencing an unprecedented boom for the past few years, the real estate sector in India is finally showing some signs of recession. As a result of the decreasing demand in real estate and property all over the country, India property prices and rentals are coming down and leading players in the market like DLF, Unitech etc. are beginning to feel the pinch. The situation has been further compounded by a slowdown in India’s now famous information technology sector, which accounted for about 70 per cent of the total demand for real estate in the country.
The recent happenings in the United States such as the bankruptcy of Lehman Brother and sell process of PE firm Merryl Lynch by the Bank of America, has had its impact on the real estate sector in India Also, most major Indian developers had their liquidity funded by the two firms. To add to the woes of this sector, US president Barack Obama’s recent utterances against outsourcing US jobs to India has done its cause no good either. The market rates in the country have shown a declining trend in all major and upcoming cities and such a state of affairs is likely to continue till the adverse effects of the global meltdown begin to disappear.
Before this slowdown, the demand for real estate in India soared quickly owing to the high net worth of individual investors. Because of a continuous flow of investments from non-resident Indians (NRIs) and private equity (PE) funds, major players in real estates increased the size of their portfolios and even small developers squeezed in to create some space for themselves. This ensured a high supply of both residential and commercial property. The controversial special economic zones (SEZs) also created great opportunities for investors and corporate houses alike to invest and get benefited from the market.
In order to tackle the present situation, real estate developers are now switching to affordable housing as the market has shown a lot of potential for such products. With the burgeoning middle-class dominating the Indian market, big players such as DLF, Unitech, Omaxe, Parsvnath etc and also middle-level builders have shifted their focus on construction of affordable houses. This move is aimed at boosting sales and demand in a weak market. Many realtors have begun offering various types of freebies and discounts to attract more buyers. For all practical purposes, the real estate sector is presently dominated by buyers rather than sellers. This has created an excellent opportunity for people to fulfill their long-cherished dream for their own homes.
However, all hopes are not lost yet for the once booming real estate sector in India. Economists are predicting an economic recovery in the not-too-distant future which should certainly be a great morale-booster for the sector. In addition, having laid to rest all speculations and apprehensions, the recent parliamentary elections have put in place a stable government which is a prerequisite to the foreign investors. Hopefully, a favorable climate now will improve the situation and bring back the boom that was associated with the real estate sector just a few years back. So, investing in real estate now may not be a bad idea altogether.
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