India Inc: Thursday, 19 May 2011
Indian real estate is undergoing a boom fuelled by growing interest from international investors.
Vikram Goyal founded Unesta to capitalise on this trend and here offers his insight into the driving force behind India’s property boom.
High returns are making the market far more attractive than some prime hot-spots like London and Tier II cities are stepping in with even greater scope of profits.
As the balance of the world economy shifts eastward, “change” seems to be the only constant and countries like India are at the forefront of this change. This has opened up innumerable investment options and opportunities for global investors.
The story of India is truly an intriguing one. Despite its inbuilt paradoxes, India has a strong economic fundamental and has witnessed accelerated growth, which has manifested itself in an unprecedented manner in the real estate industry. From survival to revival, the Indian real estate sector has exhibited unique resilience and upsurge. This phenomenon can be understood in the context of multiple economic forces, which are simultaneously acting on the real estate sector.
The growth of the real estate industry in the country from a state of inertia to euphoria has been contributed by the factors like:
Source: The Nielson Research on Indian Market Scenario 2008
In London, where residential returns average at a modest 6- 8 per cent, and prime London residential investments yield just 4-5 per cent, NRIs (non-resident Indians) are eager to invest in India where the returns are 20-25 per cent on average. Since most property in India is available to people of Indian origin and non-resident Indians only, for the global Indian, India is a great investment opportunity.
Property investment in India has great potential as it not only proves to be a hedge against currency fluctuation and government policies but at a micro level, India proves to be a natural choice for NRIs. Not just from the standpoint of being connected to one’s roots but also from the advantage of a retirement home, an annual holiday spot, a home for one’s parents, a future security or a pure investment. Whatever the reason for property investment, when it comes to India, the key lies in “location, location, location”.
The top locations encompassing the new facets of Indian real estate are Ahmedabad and Delhi with a capital appreciation of whopping 66.8 per cent, 30 per cent and 13.5 per cent respectively (Source: Makaan.com Property Index). Today, India is involved in creating urban assets by generating and regenerating spaces.
The metro cities of India have come a long way; they are unrecognisable from their past avatar. Glitzy shopping malls, multiplexes and entertainment centres, luxury hotels, fancy office blocks, smart apartments and luxury villas – are evidence of real estate changing the face of the country’s urban centres. Thus, places like Gurgaon in Delhi National Capital Region and Panvel in Navi Mumbai exemplify extensions and spill-overs of existing cities like Delhi and Mumbai. The future outlook for both these cities is promising.
Moreover, Tier II cities in India are now providing new opportunities of money multiplication mainly due to two reasons. Firstly, the metro cities are slowly getting congested and secondly, people living in Tier II cities want to upgrade to a better standard of living. Thus infrastructure and urban spaces are being regenerated.
Ahmedabad is a classic case of urban renewal of an existing Tier II city. Ahmedabad has leaped ahead of other Tier II cities in terms of growth, because of its development-oriented philosophy and global outlook.
When investing in property, the investor can minimise risks and maximise returns with a strategic entry and exit. For instance, at Unesta, we select the right developers and projects to balance the risk-return equation with portfolio diversification. Investors are able to unlock the potential and explore the opportunities of India real estate by:
- Combining local knowledge and global outlook
- Eliminating the black box effect of Indian real estate with clear and transparent transaction techniques
- By tailoring client specific investments with capital gains and cash flows
- Strong industry links and understanding of the real estate market dynamics.
We are at the helm of creating a new hallmark in the Indian real estate industry and bridge the cross-continental gap to help tap into a fast-growing market.