Will a crash in US property rates hit rates here too?

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Dear Fpguru,
Real Estate investment is a very important form of investment, especially as per the Shariah form of investments. I was wondering if a real estate crash in a country like USA or Europe could cause an impact to the real estate markets in India.

Also, I wonder why in Dubai, Indians residing there cannot own a property.  Would this not help the city as say the economy in Dubai recedes, Indians will leave as they don’t own property there and the income that comes through rent will also stop for the landlords?

 


Regards,


Ishan

Dear Ishan,


Thanks for visiting our website. You have asked a very wide but interesting question.  The first part of your question is regarding the real estate crash in western countries affecting India’s property prices. Well this depends on a couple of things.

 

We live in a global village now & a fall in any major nation’s economy does affect the whole world. The Sub-prime crisis of 2007-08 & European PIIGS crisis of 2009-10 did affect other major economies too. It affected all forms of investment from shares to liquid money market rates. Though the affect was there everywhere the impact may or may not be that severe. India & China, both recovered faster than others. China due to its enigmatic growth rates & India due to its huge domestic consumption market.


So though a fall in real estate prices may affect Indian prices, the impact may not be large immediately.  In fact seeing this international investors looking to invest in real estate may invest more amount here for capital growth not available elsewhere.


The main reason we are seeing a dramatic rise in Indian property rates is due to rising incomes, huge shortage of good living spaces in metro cities especially Mumbai, availability of home loans, etc.  Speculation & the parallel economy too are pushing prices up.


The second question on Indian’s not allowed to invest in property in UAE is a decision of the respective government for which nothing can actually be done. Any serious recession will cause not only Indians but also other immigrants to leave irrespective of owning or not owning a property there. This will be the case anywhere around the world. Rent can only be paid if jobs are well-paid.

Hope this solves your query!

Regards,
Fpguru.com

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