By: Simon Reid, Chairman, Anglo Indian Group of Companies
In all markets around the globe, challenging market conditions – whilst painful at the time – do have a beneficial long-term impact on the market in that they sort out the ‘wheat from the chaff’. In China, there is growing concern of a property slump due to the stretched financial condition of many developers. No doubt the fittest will survive, and those with marginal product offerings or unstable financial platforms will suffer or collapse. Whilst painful for those directly affected by this, it does generate a more efficient market in the long-term.
I do not think that the Indian real estate sector is heading for a slump despite the high interest rate environment we are living in currently. Developers will need to be ever more focused on delivering high quality products and associated services at competitive market rates.
In the heady days of 2006-07 when developers were taking bookings at such a rapid rate that they sold out schemes before they had broken ground, quality construction and timely completion of projects suffered in the race for the next deal. End customers are now more discerning about which developer to put their faith (and hard earned salaries/savings) in, which is only good for the market.
Notwithstanding high inflationary pressures in India, the parlous state of economies in the west is driving investors and corporations to seek higher growth in Asia and emerging markets such as South America. India represents one of the strongest opportunities for global investors and multinational corporations that the economy should maintain its strong GDP growth in the current year. Whilst this may not reach the 8-9% levels achieved previously, most economic forecasters expect a 7-7.5% range for GDP growth in the year to 31st March 2012, which I would agree is a realistic target.
Hence the broader world economy’s travails should prove to be positive for India and whilst foreign inward investment (FII) and foreign direct investment (FDI) may still witness short-term volatility, on a medium term view our expectation is that investment via FII or FDI will be strong.
