Word: sectoral
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...this year. With just about a week to go until Diwali, the mood is decidedly downbeat. The demon of impending economic doom refuses to die, and as tightened liquidity makes people put off larger purchases, the real estate sector is facing the worst attack. "This time last year, I was selling 10 to 12 properties every day," says Alok Gupta, who runs Advanced Real Estate in the New Delhi suburb of Noida. "This time, I haven't sold a single property all month...
Considered the barometer of its economic growth, the real estate sector in India has grown 30% to 35% during the past five years, reflecting the rapidly increasing demand for office, commercial and industrial space, as well as for bigger homes, now considered within the range of India's prospering working classes. But the economic juggernaut began slowing earlier this year because of double-digit inflation and a severe liquidity crunch (a fallout from the U.S. subprime crisis). Now economic activity may shrink as part of a global slowdown. The country's growth estimates of 9% at the beginning...
Shukla says if the situation does not improve, there could be distress sales within the next six months. The realty sector was heading for a cyclical slowdown even before the current economic slump. Over the past few years, increasing demand had pushed up prices, with speculators jumping in to further inflate the market. Eventually, inventory piled up when buyers refused to pay unrealistically high prices. "So many transactions were taking place between speculators and investors that no one bothered to find out what the end user, the family who would eventually live in the house, would be willing and able...
...underlying reason for the relative lack of panic so far is that Dubai real estate remains a financial haven for wealthy individuals from riskier nearby countries like Iran and Pakistan. What's more, Dubai's real estate sector is dominated by a handful of major companies - collectively dubbed "Dubai Inc." - that are directly or indirectly owned and controlled by the government. This means, analysts say, that Dubai authorities could effectively stave off a bubble burst by keeping finished projects off-line until market conditions improved. In the event of a systemic threat, Dubai can probably rely on super-rich...
...Dubai's biggest risk is its daring reliance on debt to drive its breathtaking building boom. Last week, Moody's estimated that in 2006, the most recent year for figures, Dubai's government and public-sector company debt was at least $47 billion, a staggering 103% of GDP. The investment-rating agency said it expected Dubai's debt to continue outpacing GDP for another five years, exposing Dubai to pronounced financing and geopolitical risks...