Real Estate - Still The Best Investment Decision, Even In Global Slowdown

Even during the current slowdown in the global economy, investing in real estate will continue to provide positive net return, which is higher than inflation in the medium and long term. Despite the global economic slowdown, demand for the housing sector will remain strong in the country. The global economic slowdown will have a positive or negative impact on Indian real estate sector. CEO of Global Realty CB Richard Ellis, said that as a whole, because the domestic market driven by demand, the recent developments in the international level will offer good opportunities for buyers to fulfill their aspirations of owning a house.

Despite the marginal slowdown in the Indian economy, which is expected to grow at a healthy rate of 7.5%, which not only reduce the impact of the global slowdown but also make it a destination of investment attractions in the world, along with China.  
Anuj Puri, Chairman and Country Head of Jones Lang LaSalle India, says midincome residential real estate investment makes sense. Therefore, for long-term investors, residential real estate is a very lucrative proposal. However, Puri advises investors to keep plugging money into projects that are in the early stages of completion, as these can be fraught with delays now.
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Anurag Mathur, executive director of Cushman and Wakefield, India, also says that the Indian real estate market may be affected, but to a lesser extent. The economy, though closely connected to global developments, is tough. 

Recently, Standard and Poor downgraded the sovereign credit of the U.S. by one notch to AA +. There is no fear that the development adversely affects the economy of India. However, the reduction in the U.S. economy AA + indicates no imminent default by the country in fulfilling its obligations in the near future, but it certainly points to a slowing economy. Besides the U.S., other developed countries in the euro area are also facing a slowing economy. This will affect the export of IT services in India, which contributes to the demand for residential real estate and office in the country.

Anuj Puri said that recent events in the USA and Europe could impact Indian IT companies, and therefore global demand for specific IT office space. IT office space can not therefore be very lucrative for short and medium term investors. However, other offices of segments that are still good in the long term.

But at the same time, there is a section of banking and industry experts who believes that outsourcing activities increase as the profitability of companies in the developed world will be under stress due to the slowdown in their economies.
Economic slowdown coupled with the relative lack of funds may force developers to fund the debt to sell their projects to reduce its debt. Many of these developers have paid a huge cost over 18% to meet their immediate needs. This, he said Puri, can lead to a fall in residential prices in cities like Mumbai.

At the same time, many experts believe that the flow of funds into India during the global slowdown will not be affected this time as it did in 2008 and 2009 due to the banking crisis. Mathur argues that the dilemma for the providers of capital to either preserve capital in the wake of continued economic uncertainty or to deploy in markets that are showing growth potential. The global economic strain put more pressure on developing economies to provide cushioning, says. As a result, global capital can seek refuge in these economies, a means of investment quality are available and political and economic obstacles are not discouraging.

The global slowdown may also bring positive things for India. With the slowdown, demand for commodities such as crude oil and metals fall resulting in a fall in prices. This will help contain inflation and may offer some relief to the economic slowdown in India. This also may prompt RBI not to raise interest rates, which are adversely affecting real estate.

However, decreasing the avenues of investment can provide the impetus to real estate. For this to happen, some other factors such as investor appetite will be aroused again. Remains to be seen whether this can lead to real investment and the consequent growth for the sector.

According to Morgan Stanley if the global slowdown will bring economic growth of developed countries by one percentage point, the Indian economy will clock between 6.5% and 7% growth in 2011-12, compared with the initial estimate of 7.8%. 

However, even in the worst cases, India's economy will grow around 7%. To satisfy even 7% growth, fresh demands for real estate will be there. However, there may be some excess for some time as an oversupply in certain markets. But in the medium and long term, investment in real estate will continue to provide positive net return that exceeds inflation. 

So, in brief, once again….

Despite the marginal slowdown in India's economy is expected to grow at a healthy rate of 7. 5%, which not only reduce the impact of the global slowdown but also make it one of the most attractive investment destinations in the world along with China.

(Source of Information - Web world and Research)

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