Leading Indian executives warn of sharp slowdown as economy stumbles

LEADING EXECUTIVES in India’s property and information technology industries yesterday warned of a severe slowdown as the global financial crisis spills into one of the world’s most promising emerging economies.

KP Singh, chairman of DLF, India’s biggest property group, said some local property companies would fail if market conditions continued to deteriorate. He urged the government to intervene by cutting interest rates sharply and offering tax incentives to rescue a sector facing tumbling prices and a sharp fall in home loan applications.

Mr Singh said urgent measures to stimulate demand were needed in housing and construction to avoid “what happened in America”, where the subprime mortgage crisis devastated the property market.

Separately, S Gopalakrishnan, chief executive of Infosys, India’s second largest IT outsourcing company, said his sector was suffering a slowdown worse than that after the dotcom bubble.

“It is definitely one of the worst situations we could be in,” he said. “When I compare with, let’s say 2001, we still grew 30 per cent annually when we came off the internet bubble. This time we are looking at 13 to 15 per cent.”

The comments came as Palaniappan Chidambaram, finance minister, told delegates at the World Economic Forum in New Delhi that India’s growth rate would bounce back to 9 per cent in 2009, a projection met with scepticism by many international and local business people.

The Congress party-led government, which is facing elections, has taken emergency action to protect its forecast of 7.5 per cent economic growth for this year by cutting interest rates and promising higher public spending.

The property and IT sectors have been hard hit by volatility on the Bombay Stock Exchange, where the benchmark Sensex Index has fallen more than 50 per cent this year.

Analysts say some property developers’ refinancing needs are expected to exceed their revenues this year. Bhaskar Chakraborty of IIFL, a Mumbai-based brokerage, said: “Lenders are faced with a situation where developers do not have the liquidity to repay maturing debt.”

Unitech, a listed developer, has debt and land repayments of Rs28.5bn (€456 million) due in the second half but is expected to earn revenues of only Rs23bn in the next 12 months.

Companies have been rushing into the real estate business, snapping up vast tracts of land, often at extremely high prices.

“Everybody and his brother wanted to get into real estate – it was sexy,” said Atul Punj, of Punj Lloyd, a construction firm. – (Financial Times service)