What are your concerns about the India market?
India mostly remains a domestic market. Growth is mostly driven by domestic demand. Earlier, funds and investors were finding it difficult to buy assets. Though the Indian government is trying to regulate the market, its unorganized nature challenges foreign as well as domestic investors and funds. Problems with clear titles and legal hurdles also make the market opaque.
India saw a recovery in real estate in 2010. Is the recovery real? Since sales have gone down in the past two quarters, can we witness another correction in the real estate sector?
In India, recovery was heavily focused in Mumbai and Delhi in the residential and commercial space. Companies in the legal sector, consumer durables, banking and manufacturing sectors are acquiring commercial spaces in newly launched and to-be launched projects. There is a good demand for residential space, too. But I don’t see any correction in the coming quarters.
The world at present is witnessing crises such as the tsunami in Japan, unstable political situation in Libya, Yemen and Syria. Will these events impact real estate prices globally?
The impact on the markets across the world is not significant. People are taking these events in their stride. But if the situation worsens, markets will be affected.
A lot of developers based out of London, east European countries and Australia have visited India in the recent past to market their properties. As shown, properties in these markets are at times cheaper than what is available in upmarket Mumbai or Delhi. Is this true? What are the few checks to run while investing in these markets? What kind of returns can one expect from these markets?
All these markets are liquid and can give good returns. In London, property prices are stable, therefore, it is a low-risk market. Overall, Europe is a growth market. East European countries are not so liquid but are cyclical in nature. Just like London, Australia is also transparent. It was depressed till the recent past, but it quickly revived.
Indian investors should be aware of the market price movement and returns. They should know the manager with whom they are dealing in these markets. Banks can provide assistance in these matters.
Why doesn’t India have real estate investment trusts (Reits) in place till date?
There is surely a market for Reits. But since the market is not regularized, it would take some time for Reits to be operational in the Indian market. Reits would make the market better. If Reits are in place, property prices and deals will have to be registered. But since states do not have uniform taxation laws across the country, there remains a problem of bringing best practices in the system. A developer becomes a true developer when they conform to Reits. But at present, most Indian developers hold their assets to get price appreciation and part-sell it to earn profits. Developer firms should change their business model before Reits come to India.
Devesh Chandra Srivastava