India, China skyscraper boom may herald slump

A skyscraper building boom in China and India may signal an impending economic correction in two of Asia's largest economies , a new report says. Barclays Capital has mapped an "unhealthy correlation" between construction of the world's tallest buildings and impending financial crises over the last 140 years.

Today, China is home to half of the world's skyscrapers - defined as buildings over 240 metres (787 feet) tall - currently under construction.

India, which has only two skyscrapers, is seeing its first skyscraper building boom, with 14 under construction, including the world's second-tallest tower, in Mumbai.

"Building booms are a sign of excess credit," said Andrew Lawrence, director of property research at Barclays Capital in Hong Kong, on Wednesday. Historically, skyscraper construction has been characterised by bursts of sporadic, but intense activity that coincide with easy credit, rising land prices and excessive optimism, but often by the time skyscrapers are finished, the economy has slipped into recession, Lawrence said. The Asian financial crisis hit as Kuala Lumpur's Petronas Towers were finished in 1997.

When Dubai's $4.1 billion Burj Khalifa was being built, Dubai nearly went bust and the world slid into the Great Recession. However, signs of trouble are escalating in China and India.

Today, China gets the dubious distinction of being the world's "biggest bubble builder,"Barclays said. Home to 53 per cent of the 124 skyscrapers now under construction globally, China is primed to raise its stock of skyscrapers by 87 per cent.

India, which has just two skyscrapers, takes honours in building the world's second tallest tower. Non-performing loans in India grew by nearly a third in the first half of this fiscal, more than triple the average annual growth rate since 2006, according to the Reserve Bank of India.

"If history proves to be right, this building boom in India and China could simply be a reflection of a misallocation of capital," Barclays said.