Quote:
Originally Posted by Economist
The global recession has bottomed,Most developed nations are now out of the woods.The recovery mode has began.
This Global Financial crisis,(GFC) has turned out to be not as bad as predicted earlier. Fortunately some developed nations did not even have negative growth. Mostly Europe and N.America was affected.
The interesting out come I have seen is:
- Emerging economies like China,India & Brazil has come out fine in the GFC.
- China (with resilient growth and commodities purchase)was the trigger that had ended the GFC.
- The wester countries are surprised (by the resilience of China & India) and now reaffirmed that future growth is in China & India.
- I am seeing renewed optimism and bullish behavior on investor sentiment towards China and India.
- In Nov 2008 no western investor wold have dreamed of investing in Indian money market or short term debt market ( The wheel that moves property market in India)
- Now there is renewed interest in the west to invest in Indian credit market due to stable INR and Interest rate arbitrage (ROI 2% US and 3.5% Australia against 7% India)
The Indian credit wheel that runs runs the growth of India is now moving again,The wheel is slowly being oiled by foreign investments again and the the wheel will picking up speed.
Equity market is seeing foreign investor returning to ride the upside.
M&A acitivities are picking up,IPO's are on the cards again.
NOW IS THE TIME TO BUY PROPERTY AT THE LOWER PRICE AND WATCH IT GROW OVER THE NEXT FIVE YEARS.
The return will not be astronomical as it was in 2005 to 08,however the forecast is healthy double digit growth for the next few years. |
Nice writeup Economist, hoping to hear more from you.
The RE boom was scripted by excessive credit and increasing salaries.
In my opinion the renewed interest in markets like India, China, Brazil etc is only because we provide cost effective outsourcing solutions to their problems in sectors like IT,Banking,Telecom,Healthcare, auto etc.
With the spending power of the developed countries reduced, the pressure on the developing countries to keep the wages low will also increase.
unless we start catering to the domestic demand and markets of developing countries, this wont change.
This is the time when entrepreneurs India should get more dynamic and focus on creating international brands and provide homegrown solutions and penetrate emerging markets to make India a global leader.I Really hope we do it.
As you said,foreign investors are only looking for short term arbitrage opportunities, they are not investing believing the growth story of India and they may abandon anytime.The government was planning a 3 years lock in period for FDI only to address this.
with the Indian companies focussing now on productivity and effeciency.It is no more whether the company is number 1 or number 10.Its whether the business is running profitable or not.Its only the yield (i.e. income/expense) that decides whether an employee should be retained or not, Not the skill or experience.The competitiveness to be attractive among other equal contenders will ensure salary remains low.
When salary is not increasing like before, the loan eligibility of people will also reduce.Though credit is now easily available, no bank is ready to loan 4-6 times the gross salary of a person like in 2005-2008.Its atmost 2-3 times the gross salary even when at low interest rates.
I wouldnt agree that increasing credit should mean increasing growth and necessarily increasing salary.
In my opinion, This liquidity can help only in keeping the RE price stagnant in the areas where property is available for the amount for which the loans are being sanctioned.with the ticket size of loans being very low, it would only expedite correction in all other areas towards the new price centre and not fuel another RE boom.
Another RE boom is surely possible, but only when salary/per-capita income also starts increasing again.It doesnt seem to be now.