luxury Global economy being affected as china property market is undertaking a significant downturn.

This downturn is driven by a regulatory crackdown on excessive borrowing by property developers, leading to a liquidity crisis, impacting the global economy.

Nevertheless, in the midst of the crisis, India find Itself Poised to benefits from these challenges resulting in various positive outcome.

 

1. Synopsis of China’s Property Market Decline 

The world’s second largest economy is facing substantial challenges, including a growing list of problems in the real estate sector, semiconductor industry and labour market gyration.

The housing market crisis is highly disruptive given that china’s property sector accounts for 20% of its GDP. Additionally, China, the world’s most populous country, is grappling with a major youth Unemployment crisis, with 21% of its urban youth unemployment.

2. China’s Real Estate Crisis: Surplus and Imbalance 

  • With almost 7 million empty homes, or 7 billion square feet of unused built-up space, China’s property market is in a crisis. With 1.4 billion people living in the nation, there is still a huge disparity because millions of these homes are empty, which underscores long-standing problems in the real estate industry.
  • More than 2 dozen developers already defaulted and have hit rock bottom and this is due to insufficient effective domestic demand
  • Beijing plan to rescue China by rescue package which includes :-
    1. Down payment reduced by central bank of China
    2. China’s central bank deputy governor Tao Ling planning fund of swords that would provide 300 billion Yuan ($42.25 billion) to financial institute to lend to local state – owned enterprises so that they can buy unsold apartments that have been already built
    3. Slashed rate of mortgage, cut down payment requirement by 5 % both for first time buyer and those looking to get a second property. Rates are as followed :-
Stages First – Time Buyer Second – Home Buyer
Earlier 20% 30%
Now 15% 25%

2.1 Some stocks surge amid economic challenges

  • Stock of property developers shot up claimed to be double digit like :-
    1. Fantasia – One of the property developers saw its stock jumped by 63%
    2. KWG – Reported a 40% increase in its share price.
    3. Sino – ocean group – also experienced a 40% surge in its stock
  • China’s authority launched a Campaign- swap old for new scheme which encourage people to replace their old apartment with new one is attracting interest.

However, this scheme faces a major hurdle which is struggling to sell their current Homes.

3. Prologue : India’s gain

Does Indian gain from the China’s loss? Actually, a sizable percentage of investors are thinking about the India market, which will surely have an overall impact on the real estate industry in the nation. In contrast to the Chinese situation, demand for both residential and commercial real estate is rising in India due to rising consumer expenditure that is further influencing urbanization infrastructure.

3.1 Opportunities for India 

  • Reconfiguring Global Supply Network 

Many nations and businesses are actively looking for raw materials, intermediate goods, and finished products from sources other than China. This change is especially noticeable in important industries like electronics, drugs, clothing, and autos. Consider this example, India’s electronics exports attained $20 billion in 2023 as outcome of big businesses like Apple expanding their manufacturing operations there. India’s reputation as the “pharmacy of the world” was cemented in 2022 when it exported pharmaceutical products valued at $25.39 billion, largely because of its vast capabilities in the manufacturing of generic drugs. With a $223 billion market capitalization, the textile sector is expanding along with global supply chains, making India a desirable destination for textiles because of its strong manufacturing capabilities and affordable prices. Additionally, the automotive with seen improvements in the production of electric vehicles, the sector produced over 4.5 million vehicles in 2022, strengthening India’s position in the global auto industry. This diversification is an opportunity for India to strengthen its position in international supply chains and a calculated risk management tactic, which will promote stability and economic growth.

  • Leveraging Trade agreement

India can also improve its access to the global market by leveraging its current trade agreements and strategic partnerships with nations like the US, Japan, Australia, and the EU.

  • Investment destination 

China’s economic slump has also reduced its attractiveness as an investment destination for foreign capital. India can capitalize on this window by offering a stable and conducive business environment, easing regulatory hurdle, providing tax incentive, and facilitating land acquistation and labour reforms.

Concluding –

He Kang, a former deputy head of the National Bureau of Statistics, claims that China’s property market has enough empty homes to house three billion people.

  • That is approximately ten times the population of the United States,
  • 15 times the population of Western Europe,
  • 14 Times the population of India ,
  • 140 times the population of Beijing, to put things into perspective.

Whether China can overcome this set back, even with government intervention, is the true question. Beijing cannot buy every empty house in the nation, and the government does not have limitless funds. Some developers might succeed, while others might not get support.