There is probably not a single person in the world today that hasn’t been affected in some way by the crisis that currently surrounds us. The majority have been affected negatively and a few positively, but everyone HAS been affected.
Not many people, though, and almost no one that has been affected without any direct link to the crisis (by this I mean people that aren’t in finance or finance related positions) actually really knows what happened and how we snowballed into something that comes along once a century.
Jonathan Jarvis, however, is someone who has and he’s managed to create an absolutely fantastic visual explanation of how this mess we’re in occurred. It explains mortgages, subrpime loans, collateralized debt obligations, securitization etc. in simple visual forms. The video is below:
According to the CEO of Kotak Realty Fund S Srinivasan, the real estate sector could witness a turnaround in the next two quarters and would see fund flow after that. “It will take at least two quarters before the fund flow to estate developer community begins, and the sector can witness a turnaround,” he said yesterday at a seminar organised by the Gujarat Chamber of Commerce and Industries in Ahmedabad.
“Kotak as a leading realty fund has corpus of Rs 3,500 crore to invest in real estate deals even at the land acquisition stage, out of which so far we have invested Rs 1,200 crore,” Srinivasan added by saying that they intend to invest the balance in the next one to two years. India has been witness to excesses across all sectors in the last three years, including real estate and it will take sometime before the sanity is restored, Srinivasan said. He highlighted the opportunities and challenges in finance, banking for the real estate sector, “as developers we should work in coordination with planners to regulate the frenzy in construction of shopping centres.”
Fortunately or unfortunately the ‘frenzy’ in construction has come to a grinding halt across India due to the sudden drop in demand for both residential and commercial properties. High labour and material costs have also added to the woes of the Realty developers. Not to mention the non-existent cash flows.
According to Srinivasan, the government should impose restriction on construction of malls within a specified catchment area.
I agree Mr Srinivasan, I recently heard of a mall coming up in Greater Kailash in New Delhi, where is the space? GK is already a highly congested area with bad traffic. Doesn’t Delhi have enough malls already? Another important question to ask is, will the coming up malls even break-even? Most existing malls are running into heavy losses with the exception of Select City Walk in Saket.
There is no doubt that currently the real estate sector is in trouble and it will take some time to recover. Experts suggest that realty prices should bottom out in 2009. For those looking to invest, this year should provide many good opportunities. For those already invested, it’s a game of patience assuming that you have the holding capacity. In the real estate businesses past success stories are generally not applicable to new situations. We must continuously reinvent ourselves, responding to changing times with innovative new business models.
The International Labour Organisation (ILO) says in its annual Global Employment Trends report that global unemployment in 2009 could increase over 2007 by a range of 18 million to 30 million workers, and more than 50 million if the situation continues to deteriorate.
Getting pushed into extreme poverty could just be the fate for some 200 million workers, mostly in developing countries, this being the effects of the worst-case scenario (50 million job losses).
“The ILO message is realistic, not alarmist. We are now facing a global jobs crisis. Many governments are aware and acting, but more decisive and coordinated international action is needed to avert a global social recession. Progress in poverty reduction is unravelling and middle classes worldwide are weakening. The political and security implications are daunting”, said ILO Director-General, Juan Somavia.
The figures indicated that developed economies would be hit the hardest by the economic crisis with the fastest rise in unemployment rates, from an average of 5.7 per cent in 2007 up to 6.6-7.9 per cent in 2009.
East Asia, which had the lowest regional unemployment rate at 3.5 per cent in 2007, could also experience a jump to 4.5-5.5 per cent in a year.
I fail to understand how these numbers are not alarming to a world already week on economic sentiments.
But is increasing unemployment as bad as we think it is?
According to Adrian Sinfield (Professor Emeritus of Social Policy at the University of Edinburgh), when there is high unemployment, the employed feel less secure, workers are less willing to leave unsatisfactory jobs, divisions in society increase, the prospect of equality of opportunity decreases.
Some experts argue that this occurred in some inner cities of Britain and helped cause the riots of the 1980s. Various attempts have been made to link unemployment to many social ills such as ill-health, premature death, attempted and actual suicide, marriage breakdown, child battering, racial conflicts and football hooliganism.
However, I think an unemployed person would work that much harder and better in order to get back on his/her feet. Some people may call me a war profiteer considering that we are at economic world war but people with existing jobs would work ( or be pushed to work) harder for the fear of loosing their job.
In all this panic there is a ray of ‘hope’. According to labour experts the impact on the working population in percentage terms would still be well below what was experienced during the Great Depression of the 1930s.
Maybe it’s time to become a realist, to prepare for the worst. There is just one problem, how does one define the ‘worst’? Is the worst yet to come? Unfortunately there is only one way to find out – wait and watch!
We sift through the mind numbing amounts of jargon filled information about business, finance, economics and trends in these fields and provide clear, easy-to-read summaries in simple English. We hope that this will enable you to learn a little more about the business world.
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