Indian real estate companies, which borrowed heavily during the peak of the economic cycle and rosy business forecast, are now caught in the vortex of piling debt post-slowdown. Most of the realtors who went on a land bank acquisition with borrowed money are struggling to repay even the interest and banks look reluctant to restructure the debt any more.
Asia Pacific Office market report by Cushman & Wakefield – that compared the rental values of Central Business Districts (CBD) across Asia Pacific – ranks NCR as the 5th most expensive CBD location in the region while Mumbai – CBD ranked 10th most expensive location in APAC. Traditionally expensive office destinations of Hong Kong, Singapore and Tokyo (continued to hold the top three positions respectively.
The real sector has emerged as one India’s largest drivers of economic growth. As a sector, it provides large scale employment and contributes significantly to the GDP. For decades, environmentalists have been warning that frenetic human economic activity associated with the breakneck speed of economic growth is placing a huge strain on the earth and its natural resources.
Replicating global trends, the Indian economy is looking towards an impending slowdown in growth due to decline in consumption expenditure, repeated hikes in interest rates and consistently high inflation.
Mumbai’s residential home sales dropped to a three-year low in the quarter ended December as record home prices and higher interest rates crimped demand, according to Liases Foras Real Estate Rating & Research Pvt.
Rising cost and falling transactions are taking their toll on the property market in both the Delhi-NCR and Mumbai.
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’.
Macro level forecast suggests Asia in general, and China and India in particular, will continue to attract foreign direct investment (FDI) despite the slowdown as Europe and the US continue to grapple with economic problems of their own.
A Knight Frank report suggests revenues of real estate companies have dropped by 19 per cent and profits have declined by 70 per cent, over the past four financial years, since 2007-08.
The year 2011 can best be described as a lackluster year for Indian real estate sector. There were several headwinds that prevented the sector from delivering to its full potential.