Saturday, December 31, 2011



The year 2011 can best be described as a lackluster year for Indian real estate sector. There were several headwinds that prevented the sector from delivering to its full potential. High property prices and rising home loan interest rates kept the home buyers away from the property market. Property transactions in major Indian cities were down by 20-40% for the year.

As we move into 2012 there are several un-answered questions. Where does the property market go from here? What is the current psyche of home buyers? Is it still a seller’s market or buyers will dominate the market movement? Is affordable housing still the top priority, when the common man goes home shopping? Which is the hottest destination for investing in real estate in 2012? To get an insight into these and many more issues,, the fastest growing online property website, conducted a survey among its users.

The survey christened “Property Trends 2012” ran on the website between 27th November to 15th Dec 2011, witnessed a voluminous participation of 4430 home buyers from across the country including cities of Mumbai, Delhi NCR, Bangalore, Chennai, Hyderabad, Pune, Kolkata, Ahmedabad, Chandigarh & more. Most of the survey takers were male, in the age group of 26 – 45 years. The major findings of the survey are highlighted here

Higher tax rebate &; Carpet area are most desired reform of 2012
Property Trends 2012 asked home buyers to give an advice that would bring a positive impact on Indian realty sector in 2012, nationally, 29% people wish for an increase in income tax exemption limit, on repayment of interest on home loan, from current 1.5 lac p.a to 3 lac p.a. Next advice from the home buyers is to resolve the constant conflict of Super area Vs Carpet area. 27% of home buyers want the developers to charge on the Carpet area rather than Super area. They believe this will bring more transparency, as Carpet area is measurable as against the latter which in most cases is ambiguous.

Home buyers expect the home loan interest rates to fall in 2012
As far as purchasing a home is concerned; arranging funds becomes the most critical aspect. Usually home buyers rely on home loan for making a property investment. In the recent past RBI has increased the benchmark REPO rate 13 times in the past 18 months. Home buyers seem to believe that RBI is at the end of the interest rate increase cycle, majority 41% expect the home loan rates to fall in 2012.

End user demand to drive property market in 2012
2012 is going to be a year that will be dominated by end users. Home buyers seem confident for making a property purchase in 2012 with some help, in the form of a price correction & softening of home loan. We asked home buyers on the main reason for buying a house in 2012.

To read the full report: PROPERTY TRENDS 2012


>2012: GLOOM vs. OPTIMISM: WHAT’S IN THE PRICE? - Alexander Treves

2011 has been an intense year for equities globally, with one consistent theme - volatility. Through the tsunami in Japan to unrest in the Middle East, concerns of slowing US and emerging market growth to the survival of the euro region, most equity markets have fallen notably. Would 2012 be any different or does the uncertainty spill over into the next year as well? Alexander Treves, Head of Investments, Fidelity Worldwide Investments, India feels that while the year could be challenging, it also presents an opportunity to build positions in top quality companies that have a long term competitive advantage.

Globally, three key factors that played out this year were the ongoing eurozone sovereign debt crisis, fears of a slowing US economy, and a sharper than expected rise in inflation in emerging markets prompting higher interest rates. Apart from these, we witnessed events such as the surge in commodity prices in the first half of the year due partly to the political stability in Middle East and North Africa, and the Japanese earthquake and tsunami which disrupted the global manufacturing supply chain.

Of these, fears over slowing growth in the US have eased with better than expected performance of the US economy recently. However, refocus on the fiscal / debt position in the US will begin to gain headlines as the presidential elections draw closer through the latter half of the year. Inflation in emerging markets could decline over the coming months and interest rates in many economies are currently on hold. The year could further test the resilience of the emerging market growth story to the economic slowdown in the developed world.

However, it will be the eurozone that is likely to dominate headlines and the situation could worsen further before being contained. Some of the key themes for 2012 could be as below:

2011 has witnessed developments on the economic as well as financial front in the euro region and these have prompted reactive and temporary fixes by eurozone governments. The locus of the crisis has now moved from the periphery to the core economies and even France and Germany have not been spared. Our colleagues in Europe believe we are in the last leg of the sovereign debt crisis, and the closer the crisis moves to the core economies, the faster would be the move towards more decisive action. In that sense, whether the eurozone breaks up or moves towards a credible fiscal union, 2012 is likely to be a challenging year – albeit the challenges will act as catalyst for resolution. Recent political changes in Spain and Italy are significant and new governments are fully focussed on fiscal prudence. Having said that, we may see a general re-pricing of core, AAA rated sovereign debt. We have started to see the beginnings of this process and the markets are ahead of the rating agencies once again. The euro region could enter into recession in view of the constrained bank lending and austerity measures. The length and depth of the recession would be dictated by the policy response from the European Central Bank.

Historically, US stock markets have had a high correlation with those in Europe. The US cannot be immune from its linkages with Europe, be it through exports or financial markets or consumer confidence. The US consumer is still burdened by debt and consumer sentiment is weak, mainly due to high inflation expectations and static growth in real income. Nevertheless, on a positive note, the release of upbeat economic indicators in the recent months, including better than expected growth numbers for the third quarter, have allayed fears of a recession in the US. Our colleagues tracking the US markets believe that corporate profits
in the US are robust.

This has historically been a reliable indicator of job creation, as confirmed by the latest jobs data, and a positive indicator for a rise in capital spending and industrial activity. Nascent signs of stabilisation in house prices, a decline in foreclosures and vacant house units, and a correction in housing inventory point to a
brighter outlook.

Most Emerging Asia economies could not stay immune to the deteriorating situation in the eurozone and sluggish growth in the US, given export linkages to the west. Capital flows to the EM have slowed leading to a further sell-off in the equity markets, tightening of credit conditions, and pressure on some currencies. Some of the countries in the region also face domestic challenges such as a correction in China’s property market, weaker investment sentiment in India, and high household debt weighing on consumption growth in Korea. Recent data releases on the growth front in China and India suggest that economic activity is losing

To read the full report: GLOOM Vs OPTIMISM

>EQUITY STRATEGY 2012: We are moving into cyclical gain in 2012

Where we are ……………. 
 The Democratic Government has become directionless

 Inflation infuser

 Capital Inflow window has tipped into "Currency crunch"

 India’s much valued entrepreneurial energy has become more of a corporate governance quagmire

Moving to…………….
■ The government has acknowledged its poor performance on reforms front and overall governance in closed way we may expect some quick policy dose in next six months through budget and hike in FDI in some sectors

 Inflation moderation outlook

■ New Divestment strategy,  Global rotation trade possibility and flow of capital through FDI route may result into rupee appreciation

■ Spreading positive investment sentiment

To read the full report: EQUITY STRATEGY 2012


What to expect and How to prepare?

A world with too much debt

Total debt-to-GDP levels in the 18 core countries of the Organisation for Economic Co-operation and Development (OECD) rose from 160 percent in 1980 to 321 percent in 2010. Disaggregated and adjusted for inflation, these numbers mean that the debt of nonfinancial corporations increased by 300 percent, the debt of governments increased by 425 percent, and the debt of private households increased by 600%. But the costs of the West's aging populations are hidden in the official reporting. If we included the mounting costs of providing for the elderly, the debt level of most governments would be significantly higher. (See Exhibit 1 below)

To read the full report: COLLATERAL DAMAGE