Interest in Indian real estate on rise

A burgeoning economy, coupled with policy reform on investment, has skyrocketed the demand for Indian real estate, especially among foreign investors.

The trend that was facilitated in April 2004 when the Securities and Exchange Board of India allowed venture funds to invest in local real estate, gained momentum in early 2005 when green-field real estate projects were opened for direct foreign investment.

"This is indeed a very prominent trend, especially in the Anglo-Saxon investment sphere. Searching for new opportunities in a world that is characterized by sharp declines in yields on many markets, emerging economies are increasingly being eyed. India, then, is a plausible target," said Tobias Just, senior economist at Deutsche Bank Research.

He added that a strong economic growth in the last few years, very strong population increase in the future and a still strong, rising demand for outsourcing services are all pointing toward strong demand growth for real estate in India.

Jumping into the fray are some of the biggest names in the business. Morgan Stanley has reportedly invested $68 million in Mantri Developers, a mid-sized construction firm in Bangalore, while Merrill Lynch has invested $50 million in Panchsheel Developers, a regional builder. New York-based Siachen Capital bought an undisclosed stake for $100 million in Nitesh Estates, a mid-sized real estate developer in India.

Consumers confident of nation's growth

The average consumer in Bangalore is confident that India will continue its economic growth at a faster pace than its neighbours and similar rated countries.

A significant minority do worry about job loss but most people say their jobs are not in serious jeopardy at the moment.

According to Bangalore-based Alliance Business Academy that conducted a survey during April-September, economic cycles are influenced by the consumers' subjective feelings of confidence.
Economists, businesses and policy-makers have a lot at stake in trying to understand how consumers feel about the economy now and its future prospects.

The people behind the survey that covered a stratified sample of households, industrial workers, students and traders, altogether 1,224 respondents, report that different sections of consumers face different situations, and perceptions vary.

For example, low housing loan rates India available can motivate many to buy a house. While increased house-buying is good for the economy, it is not necessarily a sign of consumer confidence.

Property market to remain 'generally favourable'

The global property market fundamentals are anticipated to remain "generally favourable", said Henderson Global Investors Ltd head of property equities Patrick Sumner.

The London-based fund management company manages some US$116bil of funds, of which US$3.5bil are in property securities.

It expects at least 12% to 13% rate of returns for property equity in the next 12 months, with favourable outlook on Britain, France, Japan, Singapore and Australia.
Sumner said contrary to general perspective, the property market was not at "the top of the cycle" since "we're not only talking about house prices."

What is attracting FDI is the India story

CB Richard Ellis is the world’s largest multinational real estate consultancy, and also the largest in India. It was the first foreign real estate consultancy to set up shop in the country way back in 1994. Anshuman Magazine, Managing Director, CB Richard Ellis, South Asia, feels that despite the rise in prices and interest rates, you are still better off buying a house provided you are going to live in it. He also fielded a host of other questions from Sanjay Kr Singh: the shortage of commercial space in Delhi, the SEZ imbroglio, and on allowing large-format retailers into the country.

After three years of continuous rise in the price of property, and with interest rates also up, have we reached a point where it is smarter to live on rent rather than buy a house?

Despite the price rise and the rise in interest rates, Indians still prefer to buy. Your calculations could tell you that you should stay on rent and invest your capital in high-yield financial instruments. Nonetheless, people buy because living in your own house brings a sense of security. You create an asset that can be bequeathed to children. For a house that you are going to live in,
my recommendation would be that you buy it.

And what about an apartment purchased as an investment?

If you are buying with borrowed capital, you should calculate: what is the cost of capital? What will my rental returns be? What capital appreciation can I expect? To answer the last question, look at the demand-supply situation in the area, and whether an infrastructure project is underway that could boost prices significantly in the area.

A large number of Special Economic Zones (SEZs) are being created, many of them in land locked states. Will these SEZs be viable when most goods are exported via the sea?

These SEZs could be viable if they are linked to ports, either by an airport or by a transport corridor. Container depots and custom clearance facilities should also be available within these SEZs.
Remember that if SEZs are being created within these states, there are probably good reasons for doing so: there may be cost advantages due to availability of raw material or of trained manpower, or the state government may be offering significant benefits. So despite higher transportation costs, their overall cost might be lower.

SOURCE -http://www.expressestates.in/full_story.php?content_id=75458

The great Indian opportunity

For many decades, Indian entrepreneurs seeking to make their fortune looked to the UAE, eager to take advantage of its potential as a global trading hub.

But in the past 12 months, a steady stream of investment has been flowing in the opposite direction. UAE-based property developers and retailers are keen to exploit India's 8.1 per cent economic growth (2005-06), a booming India real estate sector, and a wealthy middle class expected to constitute 30 per cent of the population by 2010.