– By Harrish Kumar Jain
It is not news that China is one of the biggest real estate markets in the world, but China’s markets are crashing down and facing one of the most difficult economic crises since the past year, sure is. Home sales have dropped in China by 60 per cent this year and the ongoing decline is said to be the worst in the country’s history. This global impact in China is mostly due to very low growth. Rising prices deter an average person from buying his/her own house. Developers find it difficult to find buyers and investors who can bankroll the stalled projects, courtesy of tight regulations and drying capital expenditure. Considering this, the overall scenario for the housing market in China looks bleak.
Investors looking elsewhere
Investors in China are looking at the Indian market as it is emerging rapidly. This will in turn have a positive impact on the Indian real estate market. It is bound to have further growth as well. Increased consumer spending largely assists urbanisation with more focus on infrastructure. This paves way for demand for both residential and commercial properties.
The Indian realty market is comparatively going strong. This is corroborated by facts. According to reliable reports, India is the second largest country for steel production after China. The collapse in the Chinese property market will also reduce commodity prices which will eventually benefit India. The Indian real estate market has a great opportunity at its doorstep since it has grown rapidly and has proven resilient in the last two years despite the global crisis.
Domestic demand on the rise
Ever since the pandemic, work-from-home opportunities have become a norm, the need for a roof over the head became more evident. Add to that the income levels are on the rise consistently. This will lead to an increase in domestic demand. Also, huge investments in infrastructure and rapid urbanisation are all leading to an increase in demand for buying homes.
This is happening due to the reforms in the real estate sector. Post the pandemic, it was observed that the rates have been raised on high-end and luxury properties from individuals and Non-Resident Indians (NRI) having a much higher net-worth. Their purchasing power is probably connected to the nosedive of rupee value.
The urbanisation factor
While the real estate market in India seems confident, it is significant to find the right balance between growth and sustainability, and know the difference between the two. The government has also taken note and are taking necessary measures to maintain equilibrium. The government’s focus on building highways and other infrastructure is leading to urbanisation. The increase in consumer spending has created a demand for both housing and commercial real estate in India. The government is also boosting the affordable housing segment that will give a fillip to the market sentiments and at the same time appeal to the affordable home category which has been in high demand for a while now. This will help in improving the market condition within a few years. To put it in a nutshell, as of now, the Indian realty sector appears to have a solid foothold. With these results, it seems unlikely that the industry is in, or headed for, a crisis. Having said that, a lot depends on the continuous upward progression of the Indian economy. The basic takeaway from the Chinese crisis is that Indian developers should reconsider business strategies to make the industry stronger by taking all the financial risks into consideration so that Indian realty markets can avoid China-like situations.
(Harrish Kumar Jain is the Vice President at Brihanmumbai Developers Association; and Founder Director of Rishabraj Group).