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townships in India. Lacking the modern, highly complex asset securitizations that have sunk developed economies, its moving parts are still recognizable and easy to fix, he says. During an interview at the recent Knowledge@Wharton Real Estate Forum, in discussion how the country's real estate market has fared over the past year, and what lies ahead for Hirco and real estate investors.
Real estate stocks have been hit hard during the current stock market meltdown. In addition, home prices have fallen by as much as 25% in certain urban markets. This is a new phenomenon in India, where boom and bust cycles in property markets have rarely occurred in the past. Rising interest rates and loss of jobs in the financial sector are squeezing demand, and home foreclosures have begun in some areas. Will the hard times continue? According to real estate experts interviewed by India Knowledge, despite the present slowdown, sound reasons exist for optimism in the long run.
These are blissful times for commercial real estate investors. Having fallen into a deep slump with the ending of the Internet boom, the market has come surging back. In 2004 alone, prices rose 26% for apartment complexes, 21% for industrial properties, 14% for retail properties and 6% for office buildings, according to Real Capital Analytics, real estate research firm. At the same time, however, a number of major institutional and private investors have been selling off large chunks of their portfolios of prime commercial real estate and putting the sale proceeds into less expensive real estate or into other assets entirely. Wharton experts and others look at real estate's revival as well as its risks.
Drive through any of India's major cities and it will be impossible to go a mile without encountering brightly colored cranes and hordes of construction workers. Commercial high rises, residential townships, industrial parks and shopping malls are exploding into existence, fueled by both long-term and speculative investors. But astute industry watchers are poking holes in that picture, pointing to the relatively small size of actual investments, sharply reduced expectations of returns and continuing concerns about the country's regulatory environment. India Knowledge spoke with foreign and domestic private investors, property developers and brokerage firms about these issues.