A real estate price correction could lead to more NPAs and this could lead to a self fulfilling cycle of a deep rooted correction in the economy.
Japan, the US, Spain and Ireland are examples of high-profile countries whose economies were destabilised by a real estate bubble burst. How and why does real estate cause economic catastrophe? Can it happen to India as well? The single common factor for real estate bubble burst across economies is the exposure of the banking sector to inflated asset prices. Economic collapse in all these countries has been led by the banking system.
The Centrepoint mall on the Orchard Road shopping strip managed by Singapore-based REIT Frasers Centrepoint Trust.
Singapore's REITs, already taking a hit from rising interest rates and tapering expectations, may have further room to fall, possibly even crimping the city-state's initial public offering (IPO) pipeline, analysts say.
As persistent low rates and easy money from quantitative easing spurred investors to chase anything paying a yield, Singapore's REITs' payouts of sometimes more than 7 percent were popular, especially when coupled with the prospect that appreciation of the local currency could add a fillip to returns.
