Why Indian Real Estate Sector Is In ‘Deep Trouble’?: Raghuram Rajan

Indian real estate, construction and infrastructure industries are in “deep trouble.” Renowned Indian economist Raghuram Rajan has declared recently that the Indian realty is in hot water and non-bank finance companies which lend to these sectors should have their asset quality reviewed to avoid any debacle.

Writing in an opinion piece in India Today magazine, Rajan also showed concern over the fate of state of rural areas owing to “significant distress.” The economist also declared that India is in a growth recession, an economy growing at a slow pace and where unemployment is rising. He further added that the starting point to address the economic slowdown will be for the Modi government to acknowledge the problem.

Raghuram Rajan
Raghuram Rajan

“The starting point has to be to recognize the magnitude of the problem, to not brand every internal or external critic as politically-motivated, and to stop believing that the problem is temporary and that suppressing bad news and inconvenient surveys will make it go away,” The News Minute quoted Rajan as saying. “India is in the midst of a growth recession, with significant distress in rural areas.”

Noteworthy here is as per recently released figures, India is witnessing the lowest GDP of 4.5 percent in six years. Bringing attention to Indian real estate sector, Rajan mentioned specifically that real estate and infrastructure sectors are in “deep trouble” and so are lenders to it like the non-bank finance companies. He further added that the crisis among shadow lenders and a build-up of bad loans at banks have curbed lending in the economy.

 

Penning down his recommendations to help the ailing Indian economy out of the ongoing slowdown, he called for reforms to liberalize capital, land and labour markets, and spur investment as well as growth. Rajan also called for reforms in land acquisition, labour laws, stable tax and regulatory regime and fast track bankruptcy resolution of developers in default among other measures to uplift the overall economy.

Know the expert views of Indian real estate experts here.

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