Economy & Real Estate: How does it taste…now?
We are almost at the fag end of the year with just one more left for decade to end in 2020. New Year brings in a lot of hope and optimism. But is the mood on the street buoyant??
2010-2020: ‘A Lost decade’
‘Politics has nothing to do with economics: both are highly uncorrelated-Ruchir Sharma’.
India has never had such a strong mandate and stable government ever in its entire history yet it’s entering into the next decade with perhaps the worst economic conditions.
Have we fallen off the cliff completely or is it just a blip in the long term upturn for the world’s 5th largest Economy..? Well nobody can predict the future accurately but we all probably know where and how it all began and what needs to be corrected to get back on the track!
India Realty: Is it one of the major culprits causing the slowdown?
At the onset of this decade, who would have thought or imagined that towards the end of it we would call it may be as one of the worst ever decade for realty sector.
One of the biggest contributors to India’s GDP and one of the largest employment generators of the country came to a grinding halt saddled with burgeoning debt, stuck projects,builder defaults,NBFC crisis etc. which took the sheen away from once regarded as the best investment avenue for Indian Household.
With billions of dollars of Indian households savings stuck in this beleaguered sector and with no turnaround seen in the near future it has shaken the confidence of homeowner/property buyer who might not return to this asset class for quite some time.
Unrealistic Expectations: Is it one of the biggest reasons for the collapse? May be yes, it is where it all started. Do you agree?
At the turn of this decade, an active real estate investor would have made 4-6x return on an average and may be 6-8x on an investment in a hotspot like Gurgaon etc. (all in a span of just 8-10 years). Looking at such outsized returns who would have dared not to plunge into this asset class creating artificial demand [mostly investor driven] resulting in a complete mess that we are in today. Developers cashed into this frenzy, kept launching new projects every month and a few of them on a weekly basis too (witnessed it firsthand) driving the prices higher, reckless land acquisitions biting more than it could chew, easy loan disbursals, creation of newer NBFCs funding the buyers & developers etc. A vicious cycle that kept going on till the cash in the system dried up (Demonetisation being one of the reasons) resulting in the complete meltdown. The sector “Collapsed under its own Weight”
2020 onwards & upwards: After a complete system overhaul that Indian real estate is witnessing currently we certainly believe that the coming decade will throw up interesting opportunities and one would see green shoots in this sector. Every Asset class is cyclical and returns non-linear. Real Estate is no exception to it. There are and will always be pockets of growth that a seasoned realty expert can help you find!! So pick the right one!
We are betting for revival from 2020 onwards with reasonable return expectations!! Are you?
Real Estate: Segments of Growth..stay tuned for the next one..
**“India continues to surprise the pessimist as much as the optimist”
**As quoted by Ruchir Sharma: Head of Emerging Markets and Chief Global Strategist at Morgan Stanley Investment Management
Written by Kunal Milwani