Indian policy makers should emulate Chinese initiatives like tax breaks and lower loan rates for first-time buyers to help strengthen the realty sector during the downturn
Indian policymakers should take a cue from the Chinese model to uplift the realty sector in many ways. With economic growth slowing more than expected and exports dipping, Chinese officials have moved in to strengthen the domestic market and put emphasis on housing sector to drive growth. They have moved away from trying to rein in prices to encouraging buyers. They have announced tax breaks, smaller down-payment requirements and lower loan rates for first-time buyers.
It realized that if housing continues to tank, China may not be able to keep growth above the 8 per cent rate the government has long regarded as the minimum necessary for prosperity. More than 80 million people are employed directly in the construction industry in China, so a prolonged downturn also threatens to lead to more unemployment and social unrest.
Experts point out, “The real estate market decides what happens to the economy and will be the swing factor” as exports are slowing and are expected to deteriorate rapidly in coming months as world demand weakens.
The new policies announced by the Chinese government look at lightening the burden of home purchases for the majority of people, especially middle and lower income groups, and expand the demand for housing. The quick response by the Chinese government reflects the central role that housing has played in China’s recent boom. Since housing was privatized in the late 1990s, about 30 million new urban homes — mostly apartments — have been built in China, according to official statistics that may well understate the total.
Before we arrive at the steps that Indian policy makers should think of implementing, let’s take a look at how both the countries are similar and can expect a huge upswing in the real estate sector provided they follow the right policies.
There is no doubt that there are several similarities between India and China in terms of GDP growth, residential property boom, organized retail malls and improving lifestyle. Both the countries are undergoing large economic expansion. At present both the countries are poised to be recognized as big economic powers. The GDP of China was 10.1 per cent in the first and second quarter of 2008 but due to worldwide recession it slowed sharply to 9 per cent, whereas GDP of India came down from 8.5 per cent last year to 8 per cent in 2008.