Indian realty anguishes to stop by end-2009

Are the anguishes of the Indian realty sector on the verge of ending? This may seem unlikely at the moment but if the recently conducted study of a leading real estate consultancy is to be believed, Indian real estate is likely to enter the recovery phase by end-this year and macro-economic and sector-specific factors will act as catalysts in this recovery.

As per the report of Jones Lang LaSalle, “Economic recovery during CY 2010-11 is likely to reinvigorate the interest of foreign investors in India’s real estate market. We expect enhanced capital inflow in the real estate sector in the medium-to-long-term.” The company after rigorous researches said in the report preliminary yield is predictable to depict compression during CY 2010-11 and capital values are likely to decline during 2010 before recovering in 2011.

“Initial yield has already started to show a declining trend during 2009 which is likely to be the case in the near-term. Yield on 10-year Indian Government Bonds is likely to harden due to higher fiscal deficit,” it said. However the report didn’t fail to report even though the high fiscal deficit is probable to indurate interest rates in the economy, all other macro-economic variables are expected to improve during CY 2010-11 which is likely to stimulate real estate market recovery after the slowdown of CY 2008-09.

It is to be noted, in accordance with the World Economic Outlook Report by IMF, the world economy is likely to contract by 1.4 per cent during 2009. All eyes, at the moment, are fixed on both India and China and this is not without reason. Analysts suggest while forward-looking economies are likely to contract by 3.8 per cent by the end of this year, emerging and developing economies are likely to grow by 1.5 per cent. Both the two countries, India and China are expected to grow by 5.4 per cent.

“India and China are expected to witness a robust recovery with increase in real GDP growth from CY 2008-09 levels and Indian economy is expected to grow at 5.4 per cent during 2009 (the second highest in the world after China, which is likely to grow at 7.5 per cent),” the report said.

Fiscal deficit in India leaped from 3.1 per cent in 2007 to 6.1 per cent in 2008 and is further expected to inch up to 6.4 per cent during 2009, it said.