The subprime crisis may have struck in the US, but real estate markets around the world are feeling the heat. Among the badly hit are most of the Indian, Chinese and Malaysian property cos. The evidence can be found in the equity markets. Some leading Indian real estate firms are trading at about 30-40% discount to their net asset values. Indian property stock prices have dropped as much as 50-67% and underperformed the Sensex by 23% in the first quarter of 2008. [Source: ET]
But is that a good news for people wanting to invest in real estate? Well, at least experts seem to be banking on it. A blurb in the leading newspaper in India reported that the property prices could fall by 20-25% by the third quarter of 2008. This however turned out to be a joke when association of property builders in Pune, India decided to increase the prices of built houses by 100-400 rupees a sq. foot. The primary reason for the hike being the inflation in the steel and other construction material prices; and not the land price.
Realty players are, however, still bullish on the markets and are talking of turning around very soon. An interesting thing to observe will be the government's policies to bring inflation under control. These are almost certainly going to be in the form adjustments to CRR; any increase to CRR is definitely going to make property players' life difficult. I'm hoping that the government locks out the mortgages and I get a chance to buy a cheap house in a prime area in a city like Pune. :-)
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