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Straight from the Specialists

The paradox of India’s real estate business

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(Any opinions expressed here are those of the author and not of Reuters)

Over the last two years, India has been battling various economic issues such as rising fiscal deficit, a falling rupee and increasing food inflation. No, nothing new there. And what does this have to do with real estate? Quite a lot.

A country’s economic performance has direct repercussions on how its real estate market behaves. This is especially true for the residential property segment. More prosperity means higher financial confidence among home buyers, and this leads to a greater demand for homes. The opposite is, of course, equally true.

We have already seen that overall sales of residential real estate in India have gone down rather markedly in major cities like Mumbai, Delhi and Chennai in the first half of 2013. The market was far more encouraging in the same period last year. Bangalore and Pune performed a little better but not by much.

There are various reasons for this slowdown in the sale of homes in India. One of them is that prices have kept rising in the bigger cities, despite actual sales decreasing. Also, home loans have got more expensive because of increased interest rates. Many Indians just aren’t earning as much this year as they did before.

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