February 09, 2009
Abstract: In enhancing economic growth, the role of housing sector, given its multiple linkages with the rest of the economy, is well known; for example, the boom in housing is widely recognized as a huge contributor to the acceleration of GDP growth during 2003-08. Not surprisingly, when the economy slowed down in 2008-09 following global financial crisis, measures to stimulate the housing demand, including cut in lending rates for low-cost houses, were announced.
These measures however are not sufficient. The economic slowdown has elevated certain risks (for property buyers), which have constrained housing demand. Notable among them is the perceived ‘completion risk’, which refers to the uncertainty about property developers delivering properties to buyers on time and within the promised budget. Further, potential buyers are currently deterred by the prospect of further decline in property prices. Policy interventions that can potentially mitigate these risks have been suggested.
Keywords: housing; real estate; recovery; completion risk; policy; construction