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News & Views on Indian Real Estate

Monday, May 05, 2008

Southern India real estate cooling off


After growing at a fast and furious pace over the past few years, the Real estate sector in southern India is cooling down. This has been caused mainly by a slowdown of the IT sector that impacts the region in more ways than one. Besides, rising home loan interest rates, climbing input rates and a general consumer reaction to the escalating cost of properties have begun to take a toll on realty in this part of the country. Plus there has been an oversupply of highly priced properties, creating some sort of a glut. Further, the builders’ community has been affected by the tightening of the credit norms as well as the negative sentiments in the money and stock markets. This downturn, however, is lending a long-overdue rationality to the market. Only the professionally well-organised and coporatised builders will be able to move on. Reading the ominous portents, builders are also diversifying into hotels, spas, hospitals, warehouses, SEZs and other segments, to escape the dependence on the cyclical residential real estate sector. The ripple of the downturn has touched almost all southern cities. But, there’s an upside of this downturn. The most beneficial outcome of all this might be that it will force builders and developers to cater to demands in the sub-Rs 35 lakh and lower affordable housing category, for which there exist crying need and a huge pent-up demand.

apoorv said...

its an very informative article

apoorv said...

if any one wants to to know whats happning in real estate market this is this something very very good and to the point

apoorv said...

i would like to tell something a abt subprime thing In the midst of the bursting housing bubble in US, UK, Spain, Ireland ..etc., sub-prime has become a common word (it also was nominated as the word of the year). There are several articles, blog entries and web sites detailing the life cycle of a mortgage loan in these countries, especially in the US, talking about how these loans are converted to Mortgage Backed Securities (MBS) and packaged as Credit Default Obligations (CDO) and sold to hedge funds, central banks, private investors and investment banks. Although it is not exactly known who owns how much of the toxic mortgage loans, at least we know what happens to these loans in a general sense. This is very important in the current scenario for any kind of safe investment in the stock market or even to have a decent understanding of the current complex derivative based economic environment.

I’ve been trying to find out what happens to a mortgage loan made in India. Does the bank own it? Or do they sell it as MBS? If they sell it as MBS who buys it? What are the risks for ICICI, HSBC and the other large mortgage lenders in India, if there is a 20% to 50% crash in real estate prices in India? Does India also have a fractional reserve banking system? With the foreclosure process in India not that well defined who will end up holding the bag?

Rajani said...

South india will definitely rise up with the entry of IT companies.

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Properties in India said...

Thanks for sharing this information. Southern India real estate is playing important role in IT business park development. NRI's looking forward to invest in southern India.

Builders Bangalore said...

Nice Article! Real estate market is big in South India. Hyderabad and Bangalore market is based on same condition.