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Dropping property prices in South Asia? Is this the right time to invest in 2019?

Real estate is widely considered a lucrative investment, provided investors have sufficient capital and relevant information at their disposal prior to commencing with the property deal finalization.

But, this orthodox approach may no longer suffice today’s global property market place; which has undergone tremendous tectonic shifts in recent years – an unprecedented rearrangement reflected in the uncertainty looming large on the real estate sector. Moreover, low investment returns have crippled the incentives for investors to park their investments in commercial land, while loan repayment is now a daunting pursuit (due to a surge in interest rates) for the stakeholders involved.

On the contrary, South Asia’s real estate sector has experienced steady growth over the past couple of years; owing to favourable legislations introduced by the authorities and an influx of foreign capital in the region. Chinese buyers, who comprise a sizeable proportion of the global investors’ lot, have directed their attention towards South Asian markets because of declining profits in Western markets. But even so, the new avenues are not proving to be too different or profitable in comparison. 2019 has brought unexpected challenges for property markets globally due to multiple reasons like financial instability and the US-China trade conflict, as well the increasing cost of borrowing. 

Significant places in South Asia are facing unprecedented problems with the atmosphere of their real estate market, including India. With an increasing number of people willing to buy property, the market should be stable. But prices were expected to rise in 2019 by 2%. Some of the larger cities have been hit the hardest by falling rates and rising inflation. As is expected from observing global trends, interest rates were simultaneously on a rise so taking out loans for long term investment also became difficult for buyers. 

On top of that, experts have said that the favourable climate for real estate investment has led to an oversaturation of its market. The property market in the country is overvalued, leaving little or no room for new buyers to step into the game. 

Pakistan seems to show prospects for buyers which are slightly more promising. The country has recently received billions of dollars in foreign investment and loans. Although the entire country is faced with rising prices and severe inflation, the avenues for investment are ever-increasing. Several new development projects have been inaugurated in and around major cities like Islamabad, Lahore and Karachi. Many other smaller cities and towns with slightly cheaper rates for property are also on the road to development owing to various development schemes starting nearby. Online property listing websites like Prop will help you review the market easily. 

Even though inflation makes it look like prices have risen this may not be the case. If prices are adjusted for inflation, the rates have actually gone down since the last year. In addition, the depreciation of the Pakistani rupee against the dollar has made foreign investment even more profitable and cheaper. 

Sri Lanka, again, is one of the regions hit badly by the changing global environment and the climate of the real estate market. It is rife with uncertainty. Several construction projects are on hold and developers are unable to pay back loans. It has become increasingly difficult to make money as an actor in the property market, either as a developer or a buyer. Even income from rent is dwindling. For an area with a history of very high returns on investment, this change in the market is devastating. 

The real estate sector cannot even expect too much help from foreign investors die to the country’s strict legislature and unfavourable laws. Their taxes are high and are often subject to change. 

Other countries in the region, like Vietnam, Cambodia or the Philippines, are growing markets. Since these places are growing economies on the road to stability, much like Pakistan or Sri Lanka, the prices are relatively cheaper. But the returns may not be great, especially in the short term. 

South Asia has the highest share of reforming and up-and-coming economies in the world. Few regions have shown as much promise and given rise to viable markets and opportunities for investment. But global trends have an impact on local markets and their functioning. Thus, the environment may not be the most favourable it has been for investors in recent years. 

It is advisable to conduct thorough research before making an investment, especially a cross-border investment into a new market in South Asia. Make sure that you are aware of the laws and taxation regimes the country and city employ, as well the expected trend for the coming year. Additionally, investing in smaller, developing markets like Pakistan can prove to be a better option than investing in established markets like Singapore. The prices you encounter here would be much more feasible. Lastly, it is vital that in the current climate you do not hope for an immediate and high return on your investment. The way to navigate around the risks of the market these days and the new trends is to be patient. 

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