Indian Economy Flourishing On Back Of Real Estate

June 27, 2007	(Be the first to rate this story!)  Loading ...
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Scout any Indian city and you will find it witnessing real estate mania for sure.  There is a multitude of construction including shopping malls, development of residential property, commercial space, and IT parks budding from the urban soil. Such projects are helping their respective cities to undergo a major makeover.

Taking the stock market into view, the DLF share will soon command a market capitalization of Rs. 90,000 crore.  Several property developers are there who are listed in stock market and trying to come close by the heels of DLF. Today, real estate stocks have been the primary choice in the stock market.

The Asia Development Bank commented about real estate scenario in India emphasizing its importance in the Indian economy. To make the concept easier to understand, the ADB divided India’s GDP into four sectors with construction joining the regular three sections: Industry, services, and agriculture.

ADB says the real estate boom to facilitate credit growth and demand for consumer durables. People borrow to buy residential property and then again for adding utilities into that home sweet home. This underlines the importance of real estate and its potential to regulate prospects for other sectors as well.

However, there is a risk of asset deflation haunting booming real estate business. The example of Hong Kong will make the things clearer.  Touted as the city of island, Hong Kong is a city of island short of land. This is a fact that has made economy largely dependent on the vagaries of land prices. They control a large portion of the city’s government revenue, personal wealth and bank credit. A sharp fall in land prices certainly sends the island’s economy hurtling towards recession.

Also, there is a drop in government tax revenues. However, there is no such situation in India. The Indian economy is far varied and comprises of various significant components including real estate, stock market, and banking system.

Asset deflation hit many countries including Indonesia and Thailand after the financial crisis of 1997. Dropping real estate prices brought a tense situation for stock market as well and squeezed personal wealth and spending.

News Published Under:   Real Estate Trends |

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