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As the world talks about the possibility of a global recession in 2013 we explore the after effects of such an event on the real estate industry in Trivandrum if it were to happen. We also predict why it might be favourable for buyers of land in Trivandrum to wait a little longer, if they can afford, to get that unbeatable price!
Going by news reports on CNN, MSNBC, Economic Times and all kinds of business media, all of Europe and especially countries like Greece & Spain are likely to remain in continued recession till end of 2013. Even the US market, might slip into a recession unless US law makers take steps as per Ben Bernake.
Now, the possibility of the recession might be 50:50 at this point, however the main aftermath of a recession are lesser growth, lower number of jobs and in general conservatism in peoples spending. The sectors which usually are most affected by recession are travel and hospitality and real estate. Since real estate is the source of demand for producers of steel and cement, the commodities industry as well subsequently takes a beating.
If we recollect the downturn in 2008 and 2009, a majority of real estate firms, provided any where between 15 to 25% discount's to sell off their inventory. Builders usually sacrifice on their margins if demand is not met to keep up with the liquidity.
However if you look at the current scenario, many expats especially those who are living in Gulf, US, Europe and Canada are looking forward to coming back into India, due to better job and growth prospects available locally. Some are even forming and starting up new ventures to cater to the demand in the Indian market. This does increase demand for housing especially in cities like Bangalore and Delhi which sees a lot of expats returning.
For Kerala, most of the NRI's live in the Gulf countries or the United States. A possible recession would mean lower demands for real estate in 2013 but it's after effects are that developers may cut corners and not provide all amenities as promised in their ongoing projects to keep up their liquidity. Larger projects and townships usually get more affected by recessionary trends as capital becomes scarce and costlier, leading to delays in project completion and frustration for the customers. The other segment which might be affected are smaller builders who operate very much on initial payments from customers to keep the project going.
Overall a recessionary trend might cut down prices for new launches or ongoing apartment projects by up to 15% but we cannot expect much of a drop in prices in the less than 60 lac segment in Trivandrum and overall Kerala, which has quite a stable domestic demand. More drops in prices could be witnessed in the more than 1crore or super luxury segment. Volatility here would be pronounced as costly projects run the risk of huge capital investments and time to completion. Developers who promise amenities like water front villas and even golf courses, might take a relook at slowing down or providing these features post construction.
For land owners who are looking to sell recession is not an ideal time. The market having grown by about 20% in the last many years could wipe off a year or two of growth in recessionary circumstances. In such an event, one of the options could be to be proactive and sell the property before 2013 or be ready to wait out this time so that you don't have to compromise on the prices and are not adversely affected.
The real good news lurking during the recession might be for prospective land buyers in 2013, who just might crack a good deal, since a recession always lowers land rates by 10-15% due to lower demand and reduced flow of capital in the economy. So watch out for more news in this regard and you might be in into make a few good bucks!
Going by news reports on CNN, MSNBC, Economic Times and all kinds of business media, all of Europe and especially countries like Greece & Spain are likely to remain in continued recession till end of 2013. Even the US market, might slip into a recession unless US law makers take steps as per Ben Bernake.
Now, the possibility of the recession might be 50:50 at this point, however the main aftermath of a recession are lesser growth, lower number of jobs and in general conservatism in peoples spending. The sectors which usually are most affected by recession are travel and hospitality and real estate. Since real estate is the source of demand for producers of steel and cement, the commodities industry as well subsequently takes a beating.
If we recollect the downturn in 2008 and 2009, a majority of real estate firms, provided any where between 15 to 25% discount's to sell off their inventory. Builders usually sacrifice on their margins if demand is not met to keep up with the liquidity.
However if you look at the current scenario, many expats especially those who are living in Gulf, US, Europe and Canada are looking forward to coming back into India, due to better job and growth prospects available locally. Some are even forming and starting up new ventures to cater to the demand in the Indian market. This does increase demand for housing especially in cities like Bangalore and Delhi which sees a lot of expats returning.
For Kerala, most of the NRI's live in the Gulf countries or the United States. A possible recession would mean lower demands for real estate in 2013 but it's after effects are that developers may cut corners and not provide all amenities as promised in their ongoing projects to keep up their liquidity. Larger projects and townships usually get more affected by recessionary trends as capital becomes scarce and costlier, leading to delays in project completion and frustration for the customers. The other segment which might be affected are smaller builders who operate very much on initial payments from customers to keep the project going.
Overall a recessionary trend might cut down prices for new launches or ongoing apartment projects by up to 15% but we cannot expect much of a drop in prices in the less than 60 lac segment in Trivandrum and overall Kerala, which has quite a stable domestic demand. More drops in prices could be witnessed in the more than 1crore or super luxury segment. Volatility here would be pronounced as costly projects run the risk of huge capital investments and time to completion. Developers who promise amenities like water front villas and even golf courses, might take a relook at slowing down or providing these features post construction.
For land owners who are looking to sell recession is not an ideal time. The market having grown by about 20% in the last many years could wipe off a year or two of growth in recessionary circumstances. In such an event, one of the options could be to be proactive and sell the property before 2013 or be ready to wait out this time so that you don't have to compromise on the prices and are not adversely affected.
The real good news lurking during the recession might be for prospective land buyers in 2013, who just might crack a good deal, since a recession always lowers land rates by 10-15% due to lower demand and reduced flow of capital in the economy. So watch out for more news in this regard and you might be in into make a few good bucks!
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