Why invest in India?
For any foreign investor, who minutely and meticulously judges all global parameters and indicators of the India property sector concerned, the decision to pump in funds in a particular location ultimately turns out to be a function of many crucial points. There are comparative yardsticks, the macro-economic indicators of the location/country, the rate of return proposition, etc. which are taken into the consideration before arriving at a final decision.
Indian property market - Key facts
Not deviating from the general trend of market and investment comparisons, one could simply ask as why an investor should be putting in funds in the India real estate sector?
In response to this pertinent question, following facts can be posed as the selling points of the Indian real estate sector:
Indian real estate sector is all slated to grow at an average growth of between 25-30% in next five years --- which is one of the fastest in the world. As against this growth trajectory, the growth rates in some of the most developed markets in the world has fallen to single digit figures.
Unlike in the developed countries, where a significant push to the real estate comes from renovation and overhauling, India is witnessing its first real boom in the real estate sector since independence and in the modern era which is supported by a burgeoning economy on a sustainable basis. So things are being created on a scratch from here.
With rise in literacy rate and new age economy businesses creating new job opportunities, the middle class brigade of India is only mushrooming which is now well exposed to global trends and, therefore, has similar aspirations in terms of lifestyle. This strong over 400 million group, therefore, is well poised to support the mammoth opportunities in the real estate sector.
India has a well-defined regulatory and financing regime in place.
Last but not the least, real estate property in India in both residential as well as commercial segments, are fast turning into gold mines with phenomenal price escalation ( more than 100% in several places) in last couple of years.
Returns and trends in the Indian property market
The price trends of different cities especially in residential segment clearly earmark that in past two years, the property price escalation has been from modest (like 20-30% in Kolkata) to massive ( like upwards of 70% in Mumbai and Delhi markets).
At several places, the escalation has also been in the range of 100 plus percentage. The trends in commercial segment is also no different and according to an estimate in the metros, their prices have grown by over 50% in last two years.
Coming to the crucial issue of rate of return, one could easily surmise the kind of money he would have made if he had bought a home in either Delhi or Mumbai or even Bangalore in 2004 and would have sold it in the current year. Simply an appreciation in the range of 100%. This, in fact, is the general trend here in the Indian real estate market today which has now triggered this hot debate as how long property could provide this kind of yield?
Going by the general trend, a sudden price escalation in any segment of the financial market normally stems from too much of speculative activities. While experts in India are not denying the fact that a peripheral element of speculation has set into the domestic real estate market, at the same time they are of the view that price is being driven by strong demand coming from newly empowered (in financial terms) middle class. However, the general verdict coming from different quarters veer round to the view that as construction activity will further pick up the momentum and there will be a better synergy between demand and supply, there would be a price correction and price escalation will get stabilized.
May be in the range of 15-20% on an annual basis a few years down the line. But even this figure is quite commendable which will further add to the dynamism of Indian real estate sector in the future.
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