UAE-based NRIs guide to property investment in India

Hyderabad, Bangalore, Chennai, Pune, Noida and Navi Mumbai are the top six cities for property investment, says JLL expert

The declining value of rupee may have augmented non-resident Indians (NRI) demand for properties back home. But a real estate expert advices investors to look at key market triggers before taking the realty plunge.

Om Ahuja, Chief Executive Officer – Residential Services, Jones Lang LaSalle India, says, “One has to look at the key market triggers to identify the right markets.”

And these critical triggers are: Existing infrastructure readiness; execution/implementation timelines for new infrastructure initiatives; demand for commercial space in the market (leading to job creation); social infrastructure and price trends.

So which cities should NRIs invest in?

After factoring all these five aspects and considering them against the current market environment, JLL expert’s top six cities for property investment are: 1. Hyderabad 2. Bangalore 3. Chennai 4. Pune 5. Noida, 6. Navi Mumbai

“To a large extent the aforementioned growth drivers are clearly visible to varying degrees in these cities,” Ahuja states.

For UAE-based NRIs, the three-day Indian Property Show, opening today (December 13) at Hall No 3, Dubai World Trade Centre, will have participation from major Indian developers having projects in the aforesaid cities. Properties worth Dh30 billion by more than 90 developers will showcased in the exhibition.

JLL experts believe the on-going trend in their commercial real estate space tends to reflect a serious growth and expansion of various corporate offices.

"There is certainly very healthy demand for Grade A commercial spaces in cities such as Hyderabad, Bangalore and Pune where demand for Grade A commercial real estate exceeds the supply scheduled for the near and long-term future."

In Noida and Navi Mumbai, there are market drivers over and above job creation at play - namely superior infrastructure and affordability.

“Navi Mumbai and Noida are absorbing investor demand from Mumbai and Delhi, where affordability plays important role for investors,” Ahuja mentions.

In the case of Navi Mumbai, one can further extrapolate the investment potential to Kharghar, Kalamboli and Ulwe. For Noida, the extended growth corridors are Noida Extension and Noida Expressway.

Individual employed by IT/ITES and banking, financial services and insurance (BFSI) industries are eventually buyers of a residential apartments.

The current absorption of residential apartments in Bangalore, Hyderabad, Pune and Chennai shows the lion’s share of demand coming from IT/ITES and BFSI employees.

"The average age of buyers range from 27 to 33 years, with the easy availability of mortgages and the desire for a self-owned home apartment before marriage being the key drivers. The highest demand is for apartments where price tags fall within the Dh266,666 to Dh666,666 (Rs4 million to Dh10m) range," Ahuja reveals.

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Prices on Residential Property Soar in India

Residential property values are on the rise in India. In Chennai they rose by 35 percent. In Greater Noida and Mumbai they skyrocketed 33 percent higher. The increases occurred in a one year period ending in June 2012.

As prices on existing properties went up, housing loan growth went down by 17 percent in June of 2011 to 15.1 percent in June of 2012. These figures come from the Reserve Bank of India.

Price increases are attributed to developers who defend themselves, saying labor and the cost of getting credit force them to get the increased monies needed from the homebuyers. Analysts put it another way saying it is due to the primary market having a high demand and developers being slow to begin new projects.

The manager of one real estate research company claims that developers have deliberately delayed supplies with the intent of keeping property prices high. In fact, in the second quarter there was a 24 percent decline in the beginning of new projects.

Mumbai is a prime example with a 73 percent decrease in the second quarter. Work was started on a mere 1,200 units in that prominent city. This is a huge decrease compared to the 4,460 that were launched in the first quarter. There were only nine projects undertaken in the second quarter.

It seems that there is a pattern, namely, the higher the price on a home, the lower the demand. Mid-range priced homes are still in demand. The prices that increased by 5-10 percent in the first and second quarters are predicted to rise by that much again during the third and fourth.

The developers all blame the cost of land rising. They also cite the price of cement, steel and wages of construction workers. The figures are up in places such as Bangalore, a city that experienced an increase of about four percent. Bangalore’s market is favorable while in cities such as Hyderabad the market is unfavorable, with the exception of the central areas.

A developer located in Bangalore saw a 73 percent increase in net profits. That was for the second quarter, ending in June of 2012. It is attributed to the lower cost to purchase land as compared to Mumbai, where land is sold at a premium price.

Residential property there rose 10 percent but only in specific areas. Other than that, the prices are not fluctuating either up or down.

Source: http://pptymag.com/prices-on-residential-property-soar-in-india/8547/