News & Views on Indian Real Estate

Wednesday, January 30, 2008

Indian Real Estate- the way ahead

I was looking at impact of slowdown in the IT/BPO sectors in the last few quarters in India and consequent drop in the market cap of these companies.Since both commercial(office) realty as well as residential realty demand depends on growth and expansion of BPO/IT businesses apart from other factors,there can be 'corrections'and may be drop in demand in both these segments.If Re-$ exchange rates continue to drop,there will be added pressure on IT companies.

In the residential segments,pick- up in retail by end users in this festive season has been weak,and promoters are with unsold inventories/booking,delaying their fund deployment plans - this is true for North and the East.Last six months many of the promoters found large no of cancellations leading to refund pressures.Many top realty players are keeping on hold things like senior level recruitments and even land acquisition.Recent trend of many realty players diversifying to areas like telecom,education etc actually points out that there is slight drop in terms how they look at the long term potential of realty business vis-a-via what they have been making in the last few years.

Many promoters blames stock market boom and Mr Chidambaram for the interest rate which has effected the sentiment of both endusers and investors.

The sign of weaknesses are plenty and some of these are good for the industry.Steps like 'pay 15%,and pay EMI after possession'....are very good step to reach actual end users with 2/3 years of EMI holidays.These innovations are result of pressure in the market,and I donot see situation easing unless there is some drastic policy changes say like drop in interest rates.However there are still lot of opportunities to make money in real estate and big ticket investments should continue to follow from outside.