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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Mumbai, India
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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According to The Associated Chambers of Commerce and Industry of India (ASSOCHAM), Indian real estate is poised for a 34-45% growth in 2008.
2007 saw a growth of between 35-38% in real estate values. Mr. Venugopal N. Dhoot, ASSOCHAM’s President said their view is that India had already emerged as the 5th world’s largest investment destination, globally in the retail sector; the market size is currently estimated at US$ 15 billion and has been growing between 35-38% in the last several years.
He also suggested that the real estate sector is likely to grow between 40-45% but that a slow down was likely in the major cities by 2010.
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Soaring office rents combined with a shortage of apartments is luring developers like Donald Trump, Emaar Properties and Damac Properties to India.
Damac, a closely held developer based in Dubai, plans to invest an estimated $5 billion in India over the next three years as a booming economy spurs demand for real estate.
Damac plan to construct houses, offices and shops in Mumbai, New Delhi, Hyderabad and Bangalore. The first project will be started in 12 months time. Damac has built waterfront luxury projects in the United Arab Emirates and is investing in Saudi Arabia and Egypt as it expands it’s sphere of influence.
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We took a look recently at the “Ups and Downs of the Indian Property market,” and felt a closer look at the situation was in order.
According to a recent report by the Financial Times, the real estate sector in India has seen tremendous growth over the past year; property prices have soared and the number and scale of projects has increased.
To fund these projects, developers are looking to investors, both domestic and foreign, through avenues such as listings on London’s Alternative Investment Market, domestic initial public offerings, private equity participation and the setting up of joint ventures.
The Indian government is now allowing foreign investment in townships, housing, built-up infrastructure and construction projects without prior approval from the exchange control regulator.
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Even for us, it is sometimes difficult to sort the informational wheat from the chaff and we are looking at conflicting reports coming from the Indian property markets at the moment.
On the one hand, its all good news: Mumbai Billionaire Mukesh Ambani is busy creating what is likely to be the “most expensive home” in the world. The Financial Times is reporting that “property prices have soared” and the Indian Government has now allowed direct foreign investment in all construction projects without prior approval, which means foreign investors are permitted to invest in wholly owned subsidiaries or in joint ventures with Indian real estate companies. There are a few minimum requirements, such as minimum capitalization requirements must be met within six months of the commencement of operations and the capital must remain locked in for three years thereafter. Foreign-invested projects must include at least 50,000 square meters of floor space and at least half the project must be completed within five years of receiving statutory clearance.
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Friday, June 22nd, 2007
Posted by Overseas Property Mall in
Indian PropertyInvestment 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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Tags: india+real+estate
Thursday, May 24th, 2007
Posted by Overseas Property Mall in
Indian PropertyAfter 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 Read the rest of this entry »
Tags: indian+real+estate
On 29th April the Hindu reported on the attempts of the Reserve bank of India (RBI) to stem India’s rising prices. This has included a tightening of domestic monetary policy with borrowing becoming more expensive for all except very small housing loans (of up to R 2 m, less than $50,000). At the time the RBI has been relaxing exchange controls for private individuals and corporations. Private investors are now able to take up to $100,000 per person out of the country each year so that Indian families are finding foreign property investments are within their reach. Indian companies are now able to borrow and invest more abroad than before although it is yet to be seen if this change is going to translate into new investments in overseas property developments.
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Tags: india+real+estate, overseas+property+investment
