Thu, 12 Dec 2013 12:07:34 -0700
The survey of 11 property market analysts showed expectations that house prices in Indian cities will rise 7.8 per cent next year, well below the current rate of consumer inflation of around 10 per cent.
Home sales in India slowed this year and unsold inventory with builders has increased as economic growth in the broader economy has decelerated quickly to half the 10 percent rate it was running at before 2008.
But the main problem, in a country where almost one-quarter of the population earns less than 50 cents a day, is the price.
"In some of the key markets in the country property prices are sky high," said Sachin Sandhir, managing director at RICS South Asia.
"Due to uncertainty about the economy, high interest rates and rising inflation, developers are holding on to their prices, making some locations unaffordable."
Indeed, a 2,000 sq.ft (185.8 sq.metre) apartment in the posh South Mumbai neighbourhood of Malabar Hill costs more than $2 million. That is not far from the average three-bedroom unit in Manhattan, New York City, which costs around $2.6 million.
Although the majority of homes in Indian cities are nowhere near that expensive, it shows how far real estate values in India's financial capital have risen. And dwindling incomes have put low-cost homes out of reach for many people.
Most of the urban price rises are expected to take place in the southern coastal city of Chennai, followed by New Delhi and its suburbs and Bangalore, while already high prices in Mumbai will likely stagnate.
Analysts gave property in Mumbai and Delhi, India's two biggest cities, an overall rating of 9 on a 10-point scale where 1 is extremely undervalued, and 10 is highly overvalued.
That is a much higher rating than in similar Reuters polls conducted around the world. Prices in the UK, which have re-touched record highs by some measures and are soaring in London, were rated 6, while those in Canada were rated 6.3.
Mumbai and Bangalore realty market have slipped as lucrative investment destinations in the Asia Pacific region as sales in these cities declined due to investors shying away, resulting in correction of prices.
The two cities have slipped to the 23rd and 20th positions, respectively, in the list of investment destinations covered by the ‘Emerging trends in real estate Asia Pacific 2014’ and published jointly by Urban Land Institute and PricewaterhouseCoopers (PwC).
There is a negative impact of economic uncertainty, regulatory and political risk that continues to result in a general sense of nervousness along with negative sentiment resulting in the foreign investors shying away from the Indian real estate market.While on the other, the undoubted potential continues to keep interest levels going in certain parcels of the Indian market, experts said.
Gautam Mehra, executive director, PwC India, said, “The general slippage of Indian cities in the rankings, coupled with the retention in the top-25 list, tells the story. On one hand, there is the negative impact of the combination of market, currency, regulatory and political risk, which continues to result in a general sense of nervousness and the tendency of foreign investors to stay on the sidelines, while on the other, the undoubted potential continues to keep interest levels going. The new entrant (Chennai) gives another positive twist to the story. In the backdrop of the outlook emanating from the report, a more conducive and transparent environment will set the ball rolling for attracting greater levels of investment, both foreign and domestic.”
However, Indian cities have managed to retain a position in the top 25 real estate destinations of the Asia Pacific region. Delhi was placed at the 21st position, while Chennai has made an entry for the first time at the 22nd position.
In the previous report of 2013, Mumbai was placed at 20th and Bangalore 19th position from where they have slipped to the 23rd and 20th positions, respectively.
These low ratings are attributed to the ongoing economic problems, an uncertain currency outlook following a mid-year plunge in the value of the rupee, and an investment environment widely perceived to be unfriendly to international investors. Still, interest in Indian markets remains high. With national elections looming and reports on the ground suggesting that the tide may be turning in receptivity to foreign investment, many foreign funds are waiting on the sidelines to see what happens, the report added.
The report said that overall for Asia, the real estate fundamentals are expected to remain strong in markets in 2014, with stiff competition for conventional assets in prime markets boosting the popularity of niche property sectors and secondary markets for investments.
“While Asia’s robust market has been accompanied by higher prices and lower yields for core products, investors have reacted not by pulling away from real estate in Asia, but by finding new ways to make the numbers work, including a focus on specialised property types such as senior care or logistics, and on opportunities in emerging markets,” said ULI north Asia chairman Raymond Chow.
Investors, however, have found out a new way to enhance returns and are trying to enter at the development level. There is an increasing number of co-invested development deals that are now being struck.
“Several large institutional players that have opened offices in Asia in order to gain access to direct deals have opted to co-invest in development sites as a means of securing core assets that would otherwise be unavailable or be too expensive. This is something of a departure from normal practice at institutional funds, but is being driven mainly by necessity,” said KK So, the Asia Pacific real estate tax leader at PwC Hong Kong.
The Emerging Trends report is based on the opinions of more than 250 internationally renowned real estate professionals, including investors, developers, property company representatives, lenders, brokers and consultants.
Home sales in India slowed this year and unsold inventory with builders has increased
After years of double-digit growth, house price rises in major Indian
cities are expected to slow to just under 8 per cent next year as a
cooling economy and rising interest rates deter new buyers, a survey
showed.The survey of 11 property market analysts showed expectations that house prices in Indian cities will rise 7.8 per cent next year, well below the current rate of consumer inflation of around 10 per cent.
Home sales in India slowed this year and unsold inventory with builders has increased as economic growth in the broader economy has decelerated quickly to half the 10 percent rate it was running at before 2008.
But the main problem, in a country where almost one-quarter of the population earns less than 50 cents a day, is the price.
"In some of the key markets in the country property prices are sky high," said Sachin Sandhir, managing director at RICS South Asia.
"Due to uncertainty about the economy, high interest rates and rising inflation, developers are holding on to their prices, making some locations unaffordable."
Indeed, a 2,000 sq.ft (185.8 sq.metre) apartment in the posh South Mumbai neighbourhood of Malabar Hill costs more than $2 million. That is not far from the average three-bedroom unit in Manhattan, New York City, which costs around $2.6 million.
Although the majority of homes in Indian cities are nowhere near that expensive, it shows how far real estate values in India's financial capital have risen. And dwindling incomes have put low-cost homes out of reach for many people.
Most of the urban price rises are expected to take place in the southern coastal city of Chennai, followed by New Delhi and its suburbs and Bangalore, while already high prices in Mumbai will likely stagnate.
Analysts gave property in Mumbai and Delhi, India's two biggest cities, an overall rating of 9 on a 10-point scale where 1 is extremely undervalued, and 10 is highly overvalued.
That is a much higher rating than in similar Reuters polls conducted around the world. Prices in the UK, which have re-touched record highs by some measures and are soaring in London, were rated 6, while those in Canada were rated 6.3.
Mumbai and Bangalore realty market have slipped as lucrative investment destinations in the Asia Pacific region as sales in these cities declined due to investors shying away, resulting in correction of prices.
The two cities have slipped to the 23rd and 20th positions, respectively, in the list of investment destinations covered by the ‘Emerging trends in real estate Asia Pacific 2014’ and published jointly by Urban Land Institute and PricewaterhouseCoopers (PwC).
There is a negative impact of economic uncertainty, regulatory and political risk that continues to result in a general sense of nervousness along with negative sentiment resulting in the foreign investors shying away from the Indian real estate market.While on the other, the undoubted potential continues to keep interest levels going in certain parcels of the Indian market, experts said.
Gautam Mehra, executive director, PwC India, said, “The general slippage of Indian cities in the rankings, coupled with the retention in the top-25 list, tells the story. On one hand, there is the negative impact of the combination of market, currency, regulatory and political risk, which continues to result in a general sense of nervousness and the tendency of foreign investors to stay on the sidelines, while on the other, the undoubted potential continues to keep interest levels going. The new entrant (Chennai) gives another positive twist to the story. In the backdrop of the outlook emanating from the report, a more conducive and transparent environment will set the ball rolling for attracting greater levels of investment, both foreign and domestic.”
However, Indian cities have managed to retain a position in the top 25 real estate destinations of the Asia Pacific region. Delhi was placed at the 21st position, while Chennai has made an entry for the first time at the 22nd position.
In the previous report of 2013, Mumbai was placed at 20th and Bangalore 19th position from where they have slipped to the 23rd and 20th positions, respectively.
These low ratings are attributed to the ongoing economic problems, an uncertain currency outlook following a mid-year plunge in the value of the rupee, and an investment environment widely perceived to be unfriendly to international investors. Still, interest in Indian markets remains high. With national elections looming and reports on the ground suggesting that the tide may be turning in receptivity to foreign investment, many foreign funds are waiting on the sidelines to see what happens, the report added.
The report said that overall for Asia, the real estate fundamentals are expected to remain strong in markets in 2014, with stiff competition for conventional assets in prime markets boosting the popularity of niche property sectors and secondary markets for investments.
“While Asia’s robust market has been accompanied by higher prices and lower yields for core products, investors have reacted not by pulling away from real estate in Asia, but by finding new ways to make the numbers work, including a focus on specialised property types such as senior care or logistics, and on opportunities in emerging markets,” said ULI north Asia chairman Raymond Chow.
Investors, however, have found out a new way to enhance returns and are trying to enter at the development level. There is an increasing number of co-invested development deals that are now being struck.
“Several large institutional players that have opened offices in Asia in order to gain access to direct deals have opted to co-invest in development sites as a means of securing core assets that would otherwise be unavailable or be too expensive. This is something of a departure from normal practice at institutional funds, but is being driven mainly by necessity,” said KK So, the Asia Pacific real estate tax leader at PwC Hong Kong.
The Emerging Trends report is based on the opinions of more than 250 internationally renowned real estate professionals, including investors, developers, property company representatives, lenders, brokers and consultants.
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