2008 was the worst year for Real Estate and the BRIC nations did not have the worst of it. In fact, US and Western Europe were the worst hit. Most builders saw their share value drop by over 76% since the housing bubble burst. As per a research by Reis, mall vacancies hit a 10 year high and are expected to worsen in 2009.
So what’s in store for real estate markets in 2009, particularly in India. The story of juggernaut growth for BRIC nations has failed to prove itself. Till early 2007, the world used to believe in the “decoupling theory” of the BRIC nations, a phenomenon that states emerging markets can maintain growth independent of any major disruptions in the US economy.
What real estate experts unanimously agree on now is to look for countries with strong middle-class growth and stick to housing and retail with a unshaken focus on long term. In India for instance DLF, Unitech and HDIL learned the price one has to pay for being overly aggressive. Their stock prices were slaughtered in 2008. Real estate in India is a scenario of oversupply in the retail space and companies are diversifying exposure to core infrastructure now.
Sam Zell, chairman of Equity Group Investments and Equity International does not consider India as an avenue for investment in the near future. His funds are more tuned to Brazil and China. Why? He says that bureaucracy and lack of transparency is the key problem with real estate development in India and projects don’t work out the way they look on paper. It’s too much of a hassle for an investment which would give him more returns in China and Brazil. He sees immense potential in China and Brazil because they would always be shielded to economic turmoil to a large extent since Mortgages contributed to 4% or less of their GDP as compared to 65% in US and 74% in UK.
1 comment:
Nice post! Any idea about the state of affairs in Japan?
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