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Chairman Views

Chairman Views

FAQ

Tier II cities of India will continue to be the hot spot for real estate investors despite the slump. Tier II and III cities would emerge as most sought-after real estate destinations in the coming year. Factors leading to growth of these areas are the saturation of metros cities. However, the primary drivers in Indian real estate market do not rely on central business locations. It is very much possible for IT/ITeS companies to operate from anywhere in India, as long as the availability of skilled man power and necessary resources is accessible easily. Moreover, the liberalised FDI policies of the government have also helped in initiated investments in the realty sector.
Consumer Confidence in India may have fallen but it is not yet vanquished. Compared to other countries in the Nielsen survey, India remains quite an optimistic country. 47 percent of Indians have an optimistic perception about local job prospects in the next twelve months, with six percent considering them to be 'excellent' and 41 percent considering them 'good'. Indians are the second most optimistic behind Indonesia (with 54 percent), when it comes to job prospects over the next twelve months. The growth prospects in India are better than most other countries at the moment.
The optimistic outlook about job prospects also trickles down to the state of personal finances of Indians. 62 percent of Indian respondents consider the state of their personal finances to be either 'excellent' or 'good' for the next twelve months - ranking Indians as the fifth most optimistic lot globally when it comes to the state of their personal finances. While Indians may be fairly optimistic about job prospects and the state of their personal finances in the next twelve months, consumers are not too confident about making purchases at the moment. Only three percent consider the current environment to be an 'excellent' time to buy the things that they want or need, while a further 37 percent consider it a 'good' time to make those purchases.
For Indians today, cash is king. People have become a lot more concerned about their future and their attitude towards money reflects that. They are diverting more cash into items that will give them financial security on a rainy day. With 66 percent Indian respondents voting for it, Putting into Savings remains the most important thing to do with spare cash after covering essential living expenses - ranking Indians the sixth greatest savers globally.
Compared to the last round of the Nielsen Global Consumer Confidence survey, the percentage of Indians putting their spare cash into savings has increased from 58 to 66 percent, reflecting the more conservative mindset of Indians currently. Paying off debts/ credit cards/ loans follows as the second most popular thing to do with spare cash, garnering 38 percent of Indians' votes, representing a four percent increase compared to the last round of the survey. Investing in shares of stock or mutual funds ranked third for one third of respondents, and witnessed a nine percent drop in comparison to the previous round of the survey.
The list can go like this - new technology products (27 percent), new clothes (27percent), holidays and vacations (25percent), home improvements/ decorating (22percent), are other areas where Indians spend their spare cash, albeit the fact that all have experienced a decline vs. second half, 2008.
Apart from saving for a rainy day, Indians are also tucking away spare cash for a comfortable future. The percentage of Indian respondents putting their spare cash into a Retirement fund has increased from 20 to 22 percent - the fifth highest percentage globally and quite high relative to the global percentage of 10 percent in putting spare cash into Retirement funds.
Indians have become more conscious about the way they handle money. The uncertain economic future is preventing Indians from taking risks on the stock market. It is also acting as a push for Indians to get their liabilities, in terms of debts and loans, behind them as fast as possible. Indians are saving as much as they can at the moment to ensure they have a nest egg behind them in case they need to dig into it at a later date.
The real estate sector has taken a big hit post the introduction of the contentious service tax on apartments, that are still under construction. I believe that this would increase property prices by 4%.
The Tier-II and Tier-III cities are witnessing growth in the residential segment. One can also witness demand in Tier-II cities for office space, primarily from the call centres and Business Process Outsourcing companies,I feel developers should be cautious and put the prices of residential properties between Rs 30 lakh and 40 lakh if they want to see the same demand in residential space in Tier-II and Tier-III cities