US meltdown hits India

News on India

The US financial crisis is bound to have a ripple effect on the Indian property market, which has already seen a considerable slowdown over the past year.

According to housing experts, about $4bn (£2.3bn) has been pumped into the Indian real estate market by Foreign Institutional Investors (FIIs) and venture capital funds. "Another $12 (£6.8bn) to $14bn (£8bn) was to flow in within the next 18 months, but this will not come anymore," said Pranay Vakil, chairman of Knight Frank India.

Anuj Puri, chairman and country head of Jones Lang Lasalle Meghraj said this is not the end of the global financial crisis. "A lot more will come out, which will have a negative impact on the property market," he said. Puri observed that in Tier 2 cities prices have already dropped by 15% to 20%. However, there has still been no price adjustment in Delhi and Mumbai.

"Developers are expecting business to pick up during Diwali. But it is unlikely to happen anytime soon. As it is, developers are facing a liquidity crunch. The big ones are using their own capital they made when the market was booming for the past four years," added Puri. However, he said that none of the builders had gone belly up.

Akshaya Kumar, CEO of Park Lane Property Advisors says the global crisis will see money dry up even further. "The developers will be strangulated further," he predicts.

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Information provided by Homes Overseas | © PropertyIndex.com 2008 | Last Updated: 16 October 2008