Recession had manifested in every part of economy, including real estate. Indian real estate players had their liquidity funded by US firms and they were hit hard after the Lehman debacle. The IT segment, which was mainly funded by the PE firms or had their exports to US markets have noticed very sharp drop of net worth of their firms. This recession also affected the Sensex, which is bullish and brought down the net worth of the leader of Indian Real Estate Players. The impact can be shown in share price of DLF, Unitech, GMR group, Reliance Group, Wipro, Satyam etc groups. The market rates in India are also dropped by 10 to 30 per cent in most of prominent as well as upcoming cities and the trend seems to be still continuing.Though it might be the end of the worst rut and liquidity crunch, Real Estate Companies are still dealing with lowered and shifting demand. With the market conditions improving since the last quarter, things are going to be better in the months to come. The Real Estate Market is now growing at 15-20% compared to last year. The actual recovery is when there is a positive sentiment floating in the market, that it is the right time to invest and that it is safe to invest.
The recent financial budget (2009) outlined plans for India Infrastructure Finance Company (IIFCL) to be given more flexibility and has been authorized to raise Rs 100,000 crore for the development of the infrastructure sector. The clearance of regulatory bottlenecks for infrastructure projects will help bring forward many pending projects, thereby giving the necessary thrust to the construction sector. The hike in infrastructure spending will be a huge boost for the Real Estate Industry as it increases the value of Real Estate Development.
There are already positive signs in the market now and one can see that new projects are being announced and the construction process (which had become sluggish during the slump) is picking up.
And here, a small digression:
One good thing about recession has been a check in the form of doing away with age old real estate discrepancies:
Real Estate Market in India was highly unorganised, fragmented, mostly characterised by large amounts of unaccounted money, shady dealings and no transparency, unscrupulous means to acquire regulatory approvals
The real estate market is now becoming more aggressive and organized. Even this sector has become highly competitive and as is true with all transparent markets, there will be a far higher reliability of product, and promises to deliver on time will be adhered to.With the finance minister pushing the public sector banks to lower lending rates, we can hope that home loans will come down to more affordable levels, and will spark off the much awaited revival in the Real Estate Market.
I agree with you Karan. But at the same time, many of the real estate firms have optimised the resources well enough to sail through these tough times. One such firm is Aliens Group in Hyderabad, who is making, one of its kind in the whole state of Andhra Pradesh, project. Last i heard about them was that they have hired more people to finish their project.
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