by Mr.
Arvind Jain, MD - Pride Group
The Indian economy
has had another tough year . Inflation went as high as 7.52 %, job
opportunities reduced significantly across industries, the rupee saw steady
erosion against the US dollar & market sentiments reached what was possibly
their lowest point ever. And yet, things could be worse.
During the depths of
the US economic crisis, entire American cities turned into ghost towns.
Thousands & thousands of people lost their jobs and were reduced to living
in tent colonies, trailers and on the streets.
Banks foreclosed
countless mortgages which the borrowers could no longer afford to pay. Homes
were put on the market at ridiculously under-valued prices and still found no
buyers.
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| Mr. Arvind Jain, MD - Pride Group |
Increase
Home Loan Defaulters ..
The scenario is quite
different in India.
Jobs were lost, but
the situation was definitely not as severe as in the US, where people not only
lost jobs but also their pensions to the ailing economy.
While there has
definitely been an increase in home loan defaulters in India, there has
certainly been no glut of foreclosed homes on the market.
Most middle-class
Indians have been able to continue paying their EMIs and keep their houses.
This is largely thanks to our conservative banking system, which requires banks
to do multiple checks before allowing a home loan to go through.
Also, Indians
consider their houses their most important possessions, and therefore make
paying their financial obligations towards them their highest priority.
What does all this
have to do with real estate investment?
A lot.
One symptom of a
recessionary economy is that people think twice
and thrice before making any new high-value financial commitments.
Biggest
Investment..
Since house purchase
is invariably the biggest investment that most Indians make in their lives,
they tend to be very cautious about doing so during times of financial
uncertainty.
They will pursue
their home ownership dreams when they perceive that stability has been restored
in the economy - and therefore in their lives.
Until then, they
would often prefer to live in rented homes.
This is also known as
the 'wait-and-watch' mind-set, which results in reduced demand for homes during
the period of insecurity.
Because property
prices are a function of demand, they tend to reduce in times of economic
uncertainty because that is the only way to keep sales going. This is the ideal
time for property investors to pick up properties at lower costs and rent them
out to purchase-averse families.
When the economy
improves, so will the appetite for home ownership. A rise in property prices
will follow naturally, resulting in a tidy profit when the property is put up
for sale.
It is not possible to
ascertain exactly when property prices will reach their lowest point - and
start picking up again after that. However, one good indicator is the job
scenario. When the industries that drive the economy start stepping up on
hiring, the economy improves.
Going by news
reports, 2014 is going to be a year of massive hiring sprees for India's
banking and Information Technology industries. This will mark the onset of
economic revival - and therefore a pickup in demand for properties, which will
signal a hardening of property rates.
While the reduced
sentiments prevail, developers and investors in India's larger cities are still
open to negotiation. Moreover, many of the new projects that were launched in
the low economic period featured significantly reduced price tags. Is this the
fabled 'market bottom' that every property investor considers the magical entry
point? Impossible to say... but whenever it does come, it will not last
forever.
About The Author
Mr. Arvind Jain is
Managing Director of The Pride Group, a world-class property development
conglomerate that is changing the cityscapes of Pune, Mumbai and Bangalore.
Established in 1996, The Pride Group has built and delivered over 10 million sq.ft.
Of constructed area and has an ambitious target of over 15 million sq.ft. by
2013.
For Media Contact..
Mr. Jay Kalghatgi
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