The Indian real estate is expected to enter the recovery phase by end-this year and macro-economic and sector-specific factors will act as catalysts in this recovery, a leading real estate consultancy said. “Economic recovery during CY 2010-11 is likely to reinvigorate the interest of foreign investors in India’s real estate market. We expect enhanced capital inflow in the real estate sector in the medium-to-long-term,” Jones Lang LaSalle said in its report.

Initial yield is expected to show compression during CY 2010-11 and capital values are likely to decline during 2010 before recovering in 2011, the company said in the report. “Initial yield has already started to show a declining trend during 2009 which is likely to be the case in the near-term. Yield on 10-year Indian Government Bonds is likely to harden due to higher fiscal deficit,” it said.

The report said although the high fiscal deficit is likely to harden interest rates in the economy, all other macro-economic variables are expected to improve during CY 2010-11 which is likely to induce real estate market recovery after the slowdown of CY 2008-09.

According to the World Economic Outlook Report by IMF, the world economy is likely to contract by 1.4 per cent during 2009. While advanced economies are expected to contract by 3.8 per cent by the end of this year, emerging and developing economies are likely to grow by 1.5 per cent. India and China are expected to grow by 5.4 per cent. “India and China are expected to witness a robust recovery with increase in real GDP growth from CY 2008-09 levels and Indian economy is expected to grow at 5.4 per cent during 2009 (the second highest in the world after China, which is likely to grow at 7.5 per cent),” the report said. Fiscal deficit in India leaped from 3.1 per cent in 2007 to 6.1 per cent in 2008 and is further expected to inch up to 6.4 per cent during 2009, it said.

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