Real Estate in India Stunted by Rupee's Fall ; Developments Are Stalled as Market Is Stymied by Tight Credit and Red Tape

By Keith Bradsher; Neha Thirani Bagri | International Herald Tribune, September 12, 2013 | Go to article overview

Real Estate in India Stunted by Rupee's Fall ; Developments Are Stalled as Market Is Stymied by Tight Credit and Red Tape


Keith Bradsher; Neha Thirani Bagri, International Herald Tribune


Rising financing costs are all the more painful because India's real estate developments take a long time to build, given the vast and often corrupt regulatory apparatus.

The Orbit Grand, a block-size complex designed to have at least 26 floors of elegant apartments, an extensive array of ground-floor stores and abundant parking for the chauffeured cars of residents and shoppers, was supposed to be the crown of India's real estate market.

Now it is turning into a symbol of the slumping fortunes of property developers and owners in a once-promising emerging economy. Construction of the Orbit Grand has almost ground to a halt at the 10th floor, the construction crane at the site seldom moves, and the builder has defaulted on its loan.

"There's no real work going on right now. There's just a minimum number of workers coming in to do small things," said Alam Sheikh, an electrician who is one of just 14 workers left at the site.

Real estate markets in cities across India are crumbling as the country's economy slows. The rupee has dropped nearly 20 percent against the dollar since early May, scaring away foreign investors.

The Reserve Bank of India, the country's central bank, raised a key short-term interest rate for commercial banks' borrowing by two percentage points in mid-July, to 10.25 percent, mainly to prevent further declines in the rupee. To put a brake on the flow of money leaving the country, the bank followed up last month with a regulation banning Indians from transferring money overseas for real estate purchases.

Rising financing costs are all the more painful because India's real estate developments take a long time to build as a result of a vast and often corrupt regulatory apparatus. Publicly traded real estate investment groups in India are heavily in debt, so they struggle to make interest payments and are not in a position to bankroll further projects.

That combination has produced bearishness about the short-term prospects for residential, commercial and industrial real estate prices in India. Sanjay Dutt, the executive managing director for South Asia at Cushman & Wakefield, the world's largest privately held commercial real estate company, predicted that prices would fall 10 percent in big Indian cities and 15 percent on the outskirts of large cities, where many speculative projects have been built. "Given the universal sentiment of the market, there could be a sharp correction between now and Gudi Padwa," Mr. Dutt said, referring to a festival next March that has long been considered an auspicious time to buy real estate.

What has sustained prices so far, and what might prevent more serious losses than those predicted by Mr. Dutt, has been the willingness of developers to hold growing inventories of unsold apartments, shops and offices without offering price discounts. The volume of real estate transactions has slumped in India as developers have refused to offer discounts for fear of starting a market rout.

"If they drop prices, investors will panic, and it will be a self- fulfilling prophecy," causing further declines in prices, said Siddharth Yog, a co-founder and managing partner of Xander Group, an international real estate investment firm started in 2005. That was the year India began allowing foreign institutional investors into its real estate market.

But with sellers refusing to cut prices, many potential buyers are losing interest. Devkinandan Agarwal, a Mumbai-based broker with three-quarters of his business in residential real estate and the rest in commercial real estate, said that until the last few months, he had had at least three or four separate meetings each day with genuine, interested buyers; now he has only one a day.

"There are now only actual users in the market. There is hardly anyone buying real estate as an investment," he said.

One longstanding complaint about business practices in India is that the country's banks lend heavily to a wealthy elite who often put very little of their own money into deals. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

Real Estate in India Stunted by Rupee's Fall ; Developments Are Stalled as Market Is Stymied by Tight Credit and Red Tape
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this article
  • Highlights & Notes
  • Citations
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.