Tag Archives: Real estate businesses

Emerging Property Markets are Gaining much Steam

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PwC real estate partner, John Forbes, told the 2012 Cambridge Real Estate Finance and Investment Conference that the global financial crisis means that the milestone could come sooner than expected. ‘Back in 2007, we predicted that the GDP of the leading emerging markets would surpass that of the leading advanced economies by 2050. The intervening global financial crisis has slowed growth overall, but the deceleration has been most marked in the advanced economies,’ he said.

Real estate investors need to adapt as emerging markets start to dominate and China, the United States, India and Brazil are set to become the four major economies, it is claimed.

‘The shift in the balance of economic power is therefore happening more rapidly. We expect there to be three dominant economies by 2050 China, the United States and India. Then there will be a significant gap to the country that we expect to be in fourth place, Brazil,’ he explained. ‘We are already standing at a milestone. According to the latest data published by the International Monetary Fund in April, the share of world GDP of emerging and developing economies is expected to overtake that of advanced economies for the first time this year,’ he added.

 

Her told delegates that it is not a question of ‘if’ real estate investors will adapt to this changed landscape but ‘when’ and ‘how’. ‘Emerging market economies will be a major source of investment opportunities but also of capital. Real estate businesses need to address both. In terms of investing in emerging markets, investor concerns need to be considered,’ he pointed out. ‘The providers of capital have become increasingly attentive about a range of governance and transparency issues. This will be a major factor in determining which emerging market real estate businesses will attract international capital,’ he said.

‘Meeting the changing expectations of investors is a challenge for many real estate businesses even in advanced economies. Those in emerging markets are generally starting from a less developed point and for them the journey will be longer,’ he added.

Realty sector seeks affordability from the government.

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Real estate businesses have much expectation from the forthcoming Union Budget 2012 that it will contain some pragmatic provisions that will lower effective price barriers for home-seekers.

Vice-president of Credai (Confederation of Real Estate Developers Associations of India) Pune Metro, Anil Pharande, said that on a macro level, a higher allocation of infrastructure funds for housing can be a favourable approach. “The government can set clear guidelines on timely commencement and completion of projects and link disbursement of these funds with adherence to these guidelines.”

Pharande also added that removal of the 10 per cent service tax on residential real estate construction, that increases the cost of new homes by as much as 3 per cent, is critical for a cost-sensitive market like Pune, which has mainly lower mid-income segment.

Real estate developers says, that broader incentives for development of affordable housing are needed, to encourage more developers to become active in this important sector and increase the supply of budget homes in the city as the city continues to face problems including high lending rates and construction costs, insufficient infrastructure and lack of affordable housing.

Even the 1 per cent interest rate subsidy on home loans can also work as a good measure to bring affordability. Also the present eligibility limit of loan amount of Rs 20 lakh should be raised to Rs 30 lakh which will help people think about buying apartments of decent sizes. Reducing taxes such as excise VAT and stamp duty on real estate will also make home purchase attractive, Pharande said.