9/11/13

A housing slump in India: Real estate market crumbles as economy slows - The Economic Times
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A housing slump in India: Real estate market crumbles as economy slows

By New York Times | 11 Sep, 2013, 0 01.38PM IST READ MORE ON Rupee | real estate | RBI | India | housing slump | economy
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Format 0 The volume of real estate transactions has slumped in India as developers have refused to offer discounts for fear of starting a market rout. Post Your Comment

MUMBAI: The Orbit Grand, a block-size complex designed to have at least 26 floors of elegant apartments, an extensive array of ground-floor stores and abundant parking for the chauffeured cars of residents and shoppers, was supposed to be a diadem of India's real estate market. Now it is turning into a symbol of the

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Farmers have decided a phased release of Most electronic brands outstripped There are concerns that allowing housing project? their economy. Construction of the Orbit Grand onions in the market this year thanks to the Onam sales target in Kerala this yr; top 400 global institutions is too re has almost completely at theMalayalis 10th unveiled a cheaper new smartphone, the YMiddle techies whowho invested while in Bangalore 15 lakh tonne storage capacity,stalled mainly with settled Gen in the East others doubt if the world's to 15 years ago now finding it difficult to iPhone 5C, which the company said is floor, the tower crane at the site seldom farmers in Maharashtra. have returned home are buying more. universities are waiting to rush in. service their home loans made from the 'incredible technology'. moves and builder gold has defaulted on its car sales back on growth path Investors cash inthe on soaring price, Maruti 90% of students at IIMs are eng Read on... cash out of ETFs after 9 months New of slump Harvard & Wharton supplies, resellers to bring down home loan. prices Silver shines as white gold loses sheen Sachin wears an electronic designer's Flipped classroom teaching cli iPhone 5C: Is Apple's cheaper model too in Europe hat with Toshiba B-Schools in India expensive? "There's no real work going on right now. Apple unveils iPhone 5S with faster ET SPECIAL: Get latest Dollar price updates on processor chip

takers and Punjab Earlier traders manipulated NRIsand from Kerala Top 400 Varsities allowe slumping fortunes of property developers onion prices, now it's farmers belt push up retail sales set up campuses in India owners in a once-promising emerging What happens if a lender takes over a

There's just a minimum number of workers coming in to do small things," said Alam Sheikh, an electrician who is one of just 14 builders left at the site.

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The real estate market in cities across India is crumbling as the Indian economy slows. The rupee has dropped nearly 20 per cent against the dollar since early May, scaring away foreign investors. The Reserve Bank of India raised a key short-term interest rate for commercial banks' borrowing by two full percentage points in mid-July, to 10.25 percent, mainly to prevent further declines in the rupee. To put a brake on the flow of money leaving the country, the central bank followed up last month with a regulation banning Indians from transferring money overseas for real estate purchases. Rising financing costs are all the more painful because India's real estate developments take a long time to build because of a vast and often corrupt regulatory apparatus. Publicly traded real estate investment groups in India are heavily in debt, so they struggle to make interest
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9/11/13

A housing slump in India: Real estate market crumbles as economy slows - The Economic Times

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payments and are not in a position to bankroll further projects. That combination has produced almost unanimous bearishness about the short-term prospects for residential, commercial and industrial real estate prices in India. Sanjay Dutt, the executive managing director for South Asia at Cushman & Wakefield, the world's largest privately held commercial real estate company, predicted that prices would fall 10 percent in big Indian cities and 15 percent on the outskirts of large cities, where many speculative projects have been built. He said, "Given the universal sentiment of the market, there could be a sharp correction between now and Gudi Padwa," an annual festival next March that has long been considered in India an auspicious time to buy real estate. What has sustained prices so far, and what might prevent more serious losses than those predicted by Dutt, has been the willingness of developers to hold growing inventories of unsold apartments, shops and offices without offering price discounts. The volume of real

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estate transactions has slumped in India as developers have refused to offer discounts for fear of starting a market rout. "If they drop prices, investors will panic and it will be a self-fulfilling prophecy," causing further declines in prices, said Siddharth Yog, a co-founder and managing partner of the Xander Group, a large international real estate investment firm started in 2005. That was the year India began allowing foreign institutional investors into its real estate market.

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But with sellers refusing to cut prices, many potential buyers are losing interest. Devkinandan Agarwal, a Mumbai broker with three-quarters of his business in residential real estate and the rest in commercial real estate, said that until the last few months, he had at least three or four separate meetings each day with genuine, interested buyers; now he has only one a day.

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"There are now only actual users in the market, there is hardly anyone buying real estate as an investment," he said. One longstanding complaint about business practices in India is that the country's banks lend

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heavily to a wealthy elite who often put very little of their own money into deals. These developers rely on minority investors and bank loans for most of the financing. India's debt tribunals, for companies unable to repay what they have borrowed, have tended to move slowly. They are reluctant to force founders of companies to incur large losses even in corporate reorganizations in which creditors and minority investors lose heavily. Raghuram Rajan, the new governor of the Reserve Bank of India, said at his inaugural news conference last Wednesday that he would try to change this. "Promoters do not have a divine right to stay in charge regardless of how badly they mismanage an enterprise, nor do they have the right to use the banking system to recapitalize their failed ventures," he said.

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9/11/13

A housing slump in India: Real estate market crumbles as economy slows - The Economic Times

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