India
View our latest posts on the property market in India. We feature interesting news and articles as well as property related data and statistics on the real estate market in India.

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After seven months of dwindling real estate sales in Mumbai leading up to the end of October this year, Mumbai has now lost all hope for a market revival after terrorists attack late last month, that claimed 195 lives.

By targeting wealthy Westerners, industrious, wealthy and hardworking citizens of Mumbai, the terrorists managed to grind the economy to a total standstill.

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cidade-de-goa-resort-goa-vainguinim-beach | credit:ishitaa

We just read an interesting radio interview transcript between BBC presenter John Waite and some expat UK property buyers that purchased property in the little slice of Indian paradise called Goa.

It seems that one little word can potentially cost hundreds of them their home. The word in question is “uncertain” and it was the hook needed by the Goan government to change a perfect existing law into one that is causing disbelief, upheaval and costly court cases in the future for sure.

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Bombay

Sometimes, it pays to look at other news sources when looking for property investing opportunities. This article for instance, from the Financial Times:

“Thomas Cook Group is buying back the Indian business it sold to the Dubai Financial group two years ago, the first stage in its strategy to expand the brand in emerging markets.

The travel operator is expected to announce on Friday it is bringing Thomas Cook India back into its stable, re-establishing its presence in a market it entered in 1881.”

The full article is here, but basically, Thomas cook, a well-established British travel agency have decided to buy back the Indian division that they sold some time ago. Why? Because they see emerging markets such as India, Russia, and China as potentially large markets.

What does this mean to the property investor?

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Despite the current issue with lack of infrastructure and clashes with displaced locals, India’s real estate prices continue to rocket. Mumbai and Delhi are now amongst the top ten most expensive office locations in the world, comparing with London, Hong Kong and Tokyo for the top slots.

A recent report by real estate consultants, Cushman and Wakefield put Mumbai, in terms of rental costs at fifth most expensive worldwide, and Delhi in tenth.

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Investment commentators continue to have doubts about the Indian real estate market and investors’ dissatisfaction with the lack of transparency in the market is, not surprisingly, coming to the fore.

There are concerns about the regulation of real estate ventures in India, the absence of title insurance, the complexity of real estate investment propositions and the effect of the bureaucracy on infrastructural development and (contingent) property developments.

Probably the most serious lack of transparency is to be found right at the start of the chain in land valuations by Indian real estate developers. That M Damodaran, chairman of the Securities and Exchange Board of India has seen fit to draw attention to failings in this area suggests that the authorities have significant concerns about how the issue is covered in annual reports and public offering prospectuses. One issue is the habit for property companies to report land for which they have signed a memorandum of understanding but which they have not purchased as being within their land bank.

Land banks play a crucial part in property company valuations and this practice prevents investors from making assessments on the basis of current values and to use potential values instead, ones that are entirely dependent upon property developments taking place. In the event of a serious downturn in the property sector the value of some developers would collapse at double speed because of this.

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After two years of rapid price increases (100% rises since early 2005) the Indian property market seems to have stalled. The Hindustan Times reports that volumes of property deals are reckoned to be 50% down in the last two months. The paper also reports that prices of some types of property are beginning to fall, particularly in less prestigious locations. Premium locations such as Cuffe Parade in Mumbai still enjoy stable prices.

The Reserve Bank of India has been sending signals about its concern over the real estate market for a considerable time. Lending for commercial real estate investment had risen by 84.4% in 2006-7 with lending for residential purposes rising 32% in the same period. In a highly regulated financial system the central bank clearly has a crucial part to play and, although it has a number of policy tools at its disposal, it is always in danger of causing distress to inflated markets as well as avoiding threats. In recent months it has orchestrated the following changes in conditions:

  • The RBI has introduced focused constraints on lending to the real estate sector (eg. higher interest rates for home loans) which had been growing at a rate of 30% a year.
  • It has raised interest rates to cool the economy as a whole

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India’s real estate boom attracts foreign players

Driven by positive growth in the economy, the property market in India is booming, report the IBEF.

The year 2006 started on a promising note when the Government of India opened the construction and development sector in February, allowing 100 per cent foreign direct investment (FDI) under the ‘automatic route’ in order to spur investment in the vital infrastructure sector.

The relaxation of the FDI ceiling saw big names like Dubai-based Emmar Properties – the largest listed real estate developer in the world – joining hands with the Delhi-based MGF Developments to announce India’s largest FDI in the realty sector amounting to over US$ 500 million in projects having capital outlay of US$ 4 billion.

Groups showing interest in India include insurance company American International Group Inc (AIG), High Point Rendel of the UK, Edaw-US, Japan’s Kikken Sekkel, Lee Kim Tah Holdings and Cesma International from Singapore.

The development of real estate in India focusses on two primary areas: retail and residential.

The global real-estate consulting group Knight Frank has ranked India 5th in the list of 30 emerging retail markets and predicted an impressive 20 per cent growth rate for the organised retail segment by 2010.

The organised segment is expected to grow from a mere 2 per cent to 20 per cent by the end of the decade, it said.

The boom is also attracting interest from foreign players. Vancouver-based Royal Indian Raj International Corporation (RIRIC) will invest a staggering US$ 2.9 billion in a single real-estate project named Royal Garden City in Bangalore over a period of 10 years. The retail value of the project is estimated at US$ 8.9 billion. Morgan Stanley Real Estate announced that it has invested around US$ 68 million in Mantri Developers Private Ltd, a private Bangalore-based real estate developer.

Key trends of the real estate boom

A report on real estate trends by Merrill Lynch said that the number of malls in Mumbai, Bangalore, New Delhi, Hyderabad and Pune was expected to grow to about 250 by 2010 as against 40 now. In terms of total area, there was 12.40 million square feet (mnsqft) of mall space available in these cities, the report said, quoting a survey by Knight Frank India.

As the competition in the market is intense, builders are going out of their way to be different. Specialised malls have become the order of the day. Gurgaon, on the suburbs of New Delhi will soon have an auto mall, while Bangalore is about to get an exclusive furniture mall. Gurgaon is set to get the biggest mall of the world  a large US$ 89.78 sq ft sprawling property that is being developed by DLF Universal to be known as the Mall of India.

Similarly in the home segment, which is driven by the availability of easy home finance, most builders are trying to woo investors with interesting features. Closed-circuit television and earthquake proofing are expected as standard features in most upmarket blocks.

Source: in2perspective

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The voice in favour of property prices coming down across the country is growing. Prices could fall as much as 20% feel experts. While industry players say with the interest rates still working favorably for the end user and speculative interest in real estate slowing down, actual users may soon start calling the shots in the property market.

Is a correction in the property market around the corner? Deepak Parekh, Chairman, HDFC for one expects property prices to fall by upto 20% in the next 6 months.

He told CNBC TV 18, “Prices have peaked and now prices logically have to come down and interest rates will go up marginally.” The rising interest rates on home loans have been another cause for worry. While industry players confirm demand for loans from high net worth individuals has seen a decline, they feel taking a home loan will still benefit an end user. On the other hand it will put a much-needed spanner in loan backed speculative buying of property

Rajiv Sabharwal, Head – Retail Assets Group, ICICI says, “If you look at people who are buying homes and getting tax benefits, even with an interest rate of 9% to 9.5% their post tax benefit cost would be 6% to 6.5%. Compare that with the rental he will have to pay and here you have not factored in the capital appreciation, which may come to him even at the rate of 10% to 15% per annum. It still goes in the favor of customers buying an own home rather than renting.”

While the demand for property still remains buoyant the volume of property transactions have taken a beating in the past two months due to prices spiraling beyond reach. Now consultants believe that builders will be driven to read just the steep prices they were quoting a year to six months back.

Source: MoneyControl India

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cidade-de-goa-resort-goa-vainguinim-beach | credit:ishitaa

While the movement against foreigners buying properties in Goa is gaining momentum in the tourist state, Goa government told the state legislative assembly on Monday that foreigners in Goa’s different talukas have purchased around 482 properties.

Summed up together, the entire properties works out to 12 lac square metres, in this tiny state.

The locals are up in arms against foreigners buying properties in the state, mostly illegally. Marking a protest, locals of Morjim village in North Goa, tilled the land purchased by foreigners. The activists asked the tenants to till the land and sow the seeds.

The coastal tourist state has always been a haven for tourists, who have now begun settling here. The data furnished in the state legislative assembly reveals that coastal Bardez and Salcette taluka, besides Panaji city, are the “most sought after” places to purchase properties for these foreigners.

Goa’s chief minister Pratapsingh Rane, who is also holding revenue portfolio, in a written reply to the state legislative assembly on Monday, stated that except Bicholim, Sattari, Ponda and Quepem taluka, foreigners have purchased properties.

Quoting data available with the state registration department, the chief minister has mentioned that maximum cases are in coastal Bardez taluka (351) and Salcette (37). “Panaji area has 75 properties being purchased by foreign nationals.”

Rane has said as far as permission from home ministry, finance ministry, foreign affairs ministry or Reserve Bank of India or any other appropriate authority is concerned, it is not applicable to the registration department.

“Necessary action as per law would be initiated on the detected violations and process is under way to detect them,” the chief minister has said.

As per information tabled on the floor of the house, Swiss, Dutch, British, German, Irish, Australian, German, Portuguese, Singaporean, Russian, Italian and Spanish nationals have purchased properties in the state.

Source: daijiworld.com
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