Mumbai, 10 December 2014 - Sentiment around Indian real estate among both domestic and international investors has improved in recent times, following the election of a new government and also on account of an upturn in consumer demand, says the Emerging Trends in Real Estate® Asia Pacific 2015 report, jointly published by the Urban Land Institute (ULI) and PricewaterhouseCoopers (PwC).
Consequently, the rankings of Mumbai, Delhi and Bangalore have improved significantly from those of last year in the list of investment destinations. In the 2015 report, Mumbai occupies the 11th position (it was ranked 23rd in Emerging Trends in Real Estate® Asia Pacific 2014 report), while Delhi and Bangalore have taken up the 14th and 17th positions respectively. In the previous year’s report, Delhi was placed at 21st position while Bangalore was at 20th position.
The positive sentiment can be gauged by the fact that global real estate funds focused on India are seeking to raise $6 billion in new capital, on top of $1.6 billion raised in the first seven months of 2014, and most of this is aimed at residential projects. In addition, there has been a significant rise in interest from large sovereign and foreign institutional players over the course of 2014.
Gautam Mehra, Partner, PwC India, said, “Mumbai has climbed the most in ranking among the cities in the survey, from 23rd position to 11th, with the other Indian cities, New Delhi and Bangalore, also seeing a jump in their rankings, driven by the election of the new government. There is certainly a positive vibe complemented by the expectation of an improved economy and a more transparent environment, keeping interest levels up among investors.
In this backdrop, the position of excess liquidity across various jurisdictions, which is pointed towards real estate, augurs well for Indian markets. Additionally, expected developments around the creation of a series of “smart cities” focused on large scale manufacturing, and the roll out of REITs, if implemented well, are expected to further add to the momentum. The outcome of large volumes in e-commerce is likely to translate to demand for large scale logistics and warehousing space,” he added.
In its city-specific observations, the report said, prices of commercial properties in Mumbai have remained stable, while rentals were showing signs of inching up as local businesses showed interest in rolling out expansion plans. Since occupancy (currently standing at around 80 per cent) rates were expected to rise, prices/rents are likely to increase too, especially for high-quality and well-located premises.
In New Delhi, commercial properties have already been witnessing a rebound on the back of a rise in leasing activities, post the 2014 national elections. Bangalore, on the other hand, has seen rents and capital values of business park facilities increasing steadily over the last few years. Some areas, such as the corridor along the Outer Ring Road have been attracting attention among investors.
Overall in Asia, real estate markets are expected to remain resilient despite weakening economic fundamentals throughout 2015, as capital continues to flow into the industry from a variety of investment sources, both domestic and international. Japan remains a favored country for real estate activity, with Tokyo and Osaka ranked first and third, respectively, in terms of investment and development prospects for next year.
“Currently, Asia’s real estate markets are beset by an abundance of riches. Whether derived from new sources of institutional capital, or from almost six years of global central bank easing, a seemingly endless stream of money is now pointed at real estate assets across virtually all jurisdictions and asset classes. This is pushing up prices and further compressing yields,” said ULI North Asia Chairman Raymond Chow, Executive Director, Hongkong Land Limited in Hong Kong. “As a result, we are seeing fewer transactions, a growing shortage of investment-grade properties, a search for alternatives to core products, and a general pullback from assets in secondary locations. We can expect this to continue over the next several months.”
The Emerging Trends report provides an outlook on Asia Pacific real estate investment and development trends, real estate finance and capital markets, and trends by property sector and metropolitan area. It is based on the opinions of more than 385 internationally renowned real estate professionals, including investors, developers, property company representatives, lenders, brokers and consultants.
The top five investment markets for 2015:
Across the Asia-Pacific region, the industrial/logistics sector is by far the most popular property type for investment prospects for the coming year. According to the report, the appeal of this sector reflects “chronic shortages of logistics capacity in most markets and the relatively higher yields still offered by logistics plays.” The hotel sector also received high ratings, due to a boom in tourism in many markets. The office sector continues to be regarded as a safe investment; but enthusiasm for the housing and retail sectors has waned.
Overall findings from the report include:
About the Urban Land Institute
The Urban Land Institute (www.uli.org) is a global nonprofit education and research institute supported by its members. Its mission is to provide leadership in the responsible use of land and in creating and sustaining thriving communities worldwide. Established in 1936, the Institute has more than 32,000 members representing all aspects of land use and development disciplines.
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