The strongest real estate markets in recent times appear to be those in which controls have curbed excessive lending, speculative buying and instability, according to a recently released Ernst & Young/ FICCI report, “Realty decoded: Investing across borders”.
Controlled markets such as India and China have resisted severe downturns, while lenient markets continue their struggle to maintain stability, the report adds.
As the real estate sector emerges from its present turmoil, the Realty Decoded report explains, long-term investments are expected to provide the most significant growth potential. Market trends indicate that the approach to investment in real estate should be one that refrains from excessive speculation and is supported by improved stability and demand.
As the world steadily emerges from the despondency of the global economic crisis, the global real estate market the world over is at an interesting crossroad, it adds. Tried and tested formats such as REITs are being introduced in China and India. Such developments reveal that investors are open to markets that may not be mature but offer opportunity backed by strong fundamentals.
Speaking of the Indian market, Rajiv Sahni, Partner, Transaction Advisory Services, Ernst & Young Pvt Ltd points out that a "sensible series of launches for affordable homes and the progressing economic environment have triggered an improvement in buyer sentiments.
"As such, 2009, ended on a fairly encouraging note for the Indian real estate sector," he states. "The recession arrived with a clear sign of caution for India, indicating that as long as the country continues to lean on global money, it cannot insulate itself from the global meltdown. If used judiciously, the capital available locally in India is not scarce giving the Indian real estate sector an opportunity to reduce dependence on foreign capital." According to Sahni, "the bane of Indian real estate has been the habit of over-leveraging."
Transparent cash flow, and not the current asset strength of the developer, are the new assessment parameters. New instruments such as private placements, qualified institutional placements (QIPs), asset monetization, exits from non-core businesses, and debt restructuring were among the many channels that developers tapped. Some realtors also rebranded certain luxury projects at low prices. "These were, to an extent, wise and successful interim measures," Mr Sahni believes.
Careful planning by the Government of India and the Reserve Bank of India (RBI) to control inflation, make finance available to actual users on reasonable terms, enforce accountability and create a climate that is conducive to transparency will be imperative to ensure that there is no tailspin from recent events and that India achieves its vision of affordable housing for all, the report states.
Amit Mitra, Secretary General, Federation of Indian Chambers of Commerce and Industry (FICCI), adds: "Indian real estate is witnessing some vibrancy and upbeat market sentiments after the steep corrections during the Global Financial Crisis in 2008-09. Global economic performance is improving and so are the prospects of Indian businesses. Indian economy is expected to grow at a rate of 8-8.5% during FY 2010-11 to be largely driven by industrial and services sectors. The outlook of global investors towards Indian real estate investments is highly optimistic when compared with developed nations of the world due to their slow pace of recovery from global crisis and market saturation.
"The policies of Government of India and the Reserve Bank of India (RBI) have been extremely helpful in triggering the recovery in the economy and that of Indian real estate, particularly the affordable housing segment. Indian real estate needs huge capital for investments in projects. Therefore, it is high time that we look at alternate sources of funding real estate projects."
The E&Y/ FICCI report also states that accelerated progress, both socially and economically, needs an environment conducive to growth, which can be fostered by good real estate practices.
"If India wishes to stay ahead in the economic race, there is a strong need to improve the regulatory environment to facilitate real estate development," the report adds.
Courtesy times property dtd 10/10/2010
For more information log on to http://www.zameen-zaidad.com
