Indian property prices, which had taken off jet appears to be losing altitude after bad debts because of their origin to the real estate reduced the U.S. financial market to its knees.
Market-men see prices cooling and projects are blocked because of lack of funds cheap, but do not expect the market crash.
The collection of funds and American investors from Western Europe, which represent a large portion of money from overseas to India, will be difficult. “Developers should explore new avenues such as the Middle East and Korea,” said the consultant global real estate Jones Lang LaSalle Meghraj country head Anuj Puri.
The first to be affected would be the price of commercial real estate, even if a correction in the residential segment is also planned. Rate has almost doubled during the three years leading to 2007, when interest rates began to harden.
“The feelings of these events as (collapse of Lehman Brothers, Merrill Lynch and others) have an impact on Banking and Financial Services’ real estate requirement of India,” Puri said.
Failed investment banker Lehman and Merrill Lynch, which was supported by the Bank of America, commercial space in India extends over 2.5 lakh square feet – which itself is not enough to bring down prices crashing, but the feeling is.
“This is not a major exhibition to examine 50 million square feet of office space transactions each year in India,” Puri said, adding that there was not much of an impact direct result of both companies down under.
Property prices in a good location would not be affected much, said Amit Sarin, Chief Executive Raj Anand Industries, in which Lehman instead of 1.8% Thursday.
However, the first within areas could feel a pinch, said Sarin, whose company is mainly the construction of the IT space.
The tightening of credit affect investment from private equity players primarily in the United States, experts said.
The current environment is “difficult” for Indian real estate market, Puri said.
Asked about the overall impact on the market, he said there could be a drop in prices due to the negative.
Overall, banks have written over $ 500 billion in bad debts, exactly half the total expected losses by the International Monetary Fund because of losing loans from American banks for people with low credit or infamous “subprime” loans.
The slowdown is also due to high interest rates and the price system, particularly in the housing segment have softened in the last year.
Private equity firm Red Fort Capital Director Chawlla Kuldip said: “Flow of funds from the United States will certainly come, at least in the short term. Fund to both private and public actions of developers are likely to fall”.
The developers, who thought of raising funds through an IPO in the near future, now reluctant to go to the capital market, he added.
Sarin Raj Anand said that companies which have strong accruals would be through internal sailing, but those who depend on debt and private equity feel the pressure.
A director of a large real estate company said the collection of funds by private developers through equity at the end. He noted that developers are already facing difficulties in obtaining Indian debts of banking and financial institutions.
Lehman Brothers has taken 50% in Thursday Unitech project in Mumbai for Rs 740 crore. He also invested $ 200 million in assets DLF Ltd, which is formed by DLF promoters.