US Financial Crisis Affects Real Estate Sector

The crisis in the US financial market will hit the Indian real estate sector hard. The sector was already reeling under tremendous pressure as RBI increased the interest rates to contain inflation, besides restricting the fund flow in it. Consultants said that in the present circumstances the real estate prices will go for a sharp correction in the short to medium term.
The financial crisis in the global market will affect the availability of fund for the domestic realty sector. As RBI has already put restriction on Indian banks to finance real estate companies in the country, they are depended on foreign funds through FDI route for their fund requirements. But, a senior consultant said following the development in US, many of the private equity funds are returning back to their mother countries.
The source said that many of these private equity funds were launched by investment banks. But, now as the fate of these investment banks is uncertain, their capability to raise funds in their country is doubtful. This will put severe constraint on availability of funds in India.
A large player in the sector said that as the availability of funds from banking sector is restricted for the realty sector, they are forced to borrow from the high net worth individuals at high interest rates at around 20%.
At the same time, the crisis in the global market has affected the demand for the real estate space in India. The development in US has affected the global economy, which has forced many of the global majors to either postpone or cut the expansion plan. According to a source in the industry, Google has cut its expansion plan substantially in the NCR region. Earlier, the global major has expressed intention to take lease of 5 lakh square feet of the office space. But now, it is learnt, it has cut its requirement to only 3 lakh square feet.

2 Comments

  1. Posted September 18, 2008 at 3:06 am | Permalink

    The upheaval in the American financial system sent shock waves through the stock market Monday, producing the worst day on Wall Street in seven years as investors digested the failure of one of its most venerable banks and wondered which domino would be next to fall.The Dow Jones industrial average lost more than 500 points, more than 4 percent, its steepest point drop since the day the stock market reopened after the Sept. 11, 2001, attacks. About $700 billion evaporated from retirement plans, government pension funds and other investment portfolios.For more view- realtydigest.blogspot.com

  2. info
    Posted January 15, 2009 at 10:25 pm | Permalink

    Media say a lot about layoff now a day, even giant corps are not immunized. Job loss and unemployment rates are increasing across the globe. Govs injects big money to create more jobs and stop the strong down turn of economy. Everyone is expecting recession getting over soon. I have a very close friend, who graduated from Harvard. Worked for ML for over 8 years, recently he’s been “right sized” too, despite of his outstanding performance and the increasing revenue he generated. OMG, now the banking industry is badly hurt, how long it would take for those financial background guys like him get back to the job market. Banking jobs are not there as much as before as easily seen on job sites in the region

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