As China's property crisis deepens, experts see a silver lining for India

The crisis that started with the collapse of real estate giant Evergrande has become worse for China, with several property giants now showing signs of potential loan defaults

China's property crisis threatens global trade but may prove to be a blessing in disguise for India, especially steel producers, experts believe. The crisis that started with the collapse of real estate giant Evergrande has become worse for China, with several property giants showing signs of potential loan defaults.

"This could be a silver lining for India's steel industry," Arun Malhotra, founding partner & portfolio manager at CapGrow Capital advisors, said. China is the world's largest steel producer and accounts for 57 per cent of the total steel production. According to Malhotra, around 30 per cent of steel mills in the country may be staring at bankruptcy as they are heavily dependent upon the real estate sector.

This might provide the companies in India with an opportunity to step up and replace the Chinese firms. India is the world's second-largest producer of steel after China. It produced 113.6 million tonnes (MT) of crude steel during FY22, 18.1 per cent higher than the production in FY21, data from the Ministry of Steel showed.

"The collapse in the Chinese property market will also cool down the commodity prices that should benefit India as a whole," Malhotra added. The commodity prices, especially oil, have remained elevated since the onset of the war in Ukraine.

Due to work from home and rising income levels, the Indian real estate sector has shown robust growth and has remained immune from geopolitical shocks. 

"Indian Real estate is primarily dependent on domestic demand which is strong enough after the pandemic lull and work from home option," Sharad Chandra Shukla, director, Mehta Equities Ltd, said.

"The huge government focus and building of highways and other infrastructure are all leading to urbanisation and increased consumer spending creating demand for both housing and commercial real estate," Malhotra added.

The Indian share market has also remained in the green.

"Barring the rise in interest and construction costs that have been well absorbed by the market in India we have not seen any weakness. Sales in Q1FY23 continue to be robust." Murtuza Arsiwalla, director, Kotak Institutional Equities, said.

Nifty Realty has jumped 8.54 per cent in the last year, whereas NSE's benchmark index, Nifty50, gained 7.14 per cent, data from NSE's website showed. The shares of several players in the sector, including Oberoi Realty, Lodha Group and Prestige Estates, have jumped more than 20 per cent since August 8, 2021. Brigade Enterprises and Phoenix Mills Limited gained 54 and 47 per cent, respectively.