Realty and Retail

Though India’s GDP projections look good as made by World Economic Outlook (WEO) released recently by the IMF, India is likely to register a Gross Domestic Product (GDP) growth of 7.9 per cent in 2008-09, which may slip to 6.9 per cent in 2009-10; the effect of inflation and credit crunch is now highly visible in two sectors; realty and retail.

In Mumbai most of the developers have discovered credit route from private financiers at a very high cost of borrowing varies from 36 to 48% in last one to two months. This is in anticipation of better comeback of property demand. However the recent property expo was disappointing for such developers. The prices depend on demand which is most uncertain. Bangalore and Gurgaon prices have seen significant corrections and Mumbai it is expected soon by a minimum 20 to 30%.

The other sector affected by inflation and market volatility is retail. Several stores are closed down in last few months. Most of the expansion plans of major group are either delayed, postponed or partially done. The procurement model from low cost manufacturers like china is also getting big hit by rising dollar prices, making situation even more worsen. Downsizing in employment is also become highly visible in this sector now.

Some RBI intervention in the form of rate cut and a good recovery of market today is news to think positive. However; on the claims of decoupling Indian economy from global players, sentiments are still coupled. And so the global direction of financial and equity markets can not be ignored to asses our equity market’s health.

Santosh Srivastava