How will the recent downgrade of the US rating from AAA to AA+ affect the real estate market? Will it result in immediate consequences or long-lasting effects? Which sector will feel the pinch more, residential or commercial real estate?
There is some good news for the residential segment, as interest rates may potentially decline, while the commercial real estate sector is expected to experience a downturn, particularly in the office space market. This event marks a historical first, leaving us with challenges in forecasting the fallout. The downgrade has resulted in heightened uncertainty globally and created significant instability within various asset classes.
On a brighter note, emerging markets like India may benefit, especially with the drop in oil prices and other commodities, which could help control inflation. Consequently, interest rates may also decrease, leading to an overall optimistic outlook for the real estate market in India.
The influx of capital will likely be directed towards residential development since there is a substantial existing capacity for commercial growth that still needs to be utilized. However, a concern for the long term remains regarding the absorption rates in the commercial sector, predominantly driven by demand from the IT/ITeS industries closely associated with the United States.