Mumbai, 16 December 2015 - The progressive evolution of Indian foreign investment policy for the real estate sector through introduction of various liberalisation measures has reinforced the confidence of foreign investors and has helped India regain favour to be one of the preferred investment destinations in the Asia Pacific region, says the Emerging Trends in Real Estate® Asia Pacific 2016 report, jointly published by the Urban Land Institute (ULI) and PricewaterhouseCoopers (PwC).
Survey respondents ranked Bangalore, Mumbai and New Delhi at 12th, 13th and 16th positions for investment prospects and at 15th, 13th and 11th positions for development prospects respectively, in the list of the 22 markets covered in the report. While there has been a marginal drop in rankings of Mumbai and New Delhi from an investment prospects perspective (they were ranked 11th and 14th, respectively in Emerging Trends in Real Estate® Asia Pacific 2015 report), Bangalore has shown a remarkable improvement as it has moved up 5 positions over its last year’s ranking (17th). The report attributes the surge in Bangalore’s rankings to its technology industry and the availability of a large pool of skilled labor necessary to ramp up the venture capital backed startups.
The report highlights that the Mumbai is on a recovery path on the commercial real estate side and, down-town is on stable ground. Delhi and nearby industrial zones have one the biggest pipelines of new supply in Asia and on the ground, occupancy problems are focused on B-grade or secondary assets rather than the higher-quality buildings, for which the demand remains high. The story in Bangalore is however different than that in Mumbai and Delhi, where even the huge amount of upcoming supply of commercial office inventory is not perceived to be a cause of concern, as it is expected to be matched by an equally high absorption rate.
Overall, the outlook seems to be positive; this is evidenced by the fact that the 80 percent of the foreign capital inflows have been all-equity buyouts by big institutional players. Even those investors who had burnt their fingers in the first round of investments in 2006-07, are not wary of Indian markets anymore, and are willing to bet their money once again on the Indian real estate story.
In the city specific observations, the survey results suggest that Mumbai is on a recovery path as far as the commercial real estate side is concerned. Further, on the residential end, there is currently a reasonable amount of oversupply in the suburbs; however, with the recent slowdown of approvals for new projects, the oversupply situation could get addressed to a certain extent.
New Delhi, on the other hand, is expected to see the biggest pipeline primarily on account of Delhi-Mumbai Industrial Corridor, a cornerstone project of the current government supported by Japanese capital that aims to develop eight international-standard industrial clusters between the two cities. Further, cash crunched developers in the residential space are being targeted by foreign investors to provide rescue capital.
Per the respondents to the survey, Bangalore is emerging as the real estate capital of India as it overtook Mumbai in this year’s rankings to become the most preferred real estate investment destination in India.
It is also important to bear in mind that this survey was undertaken through the months of September and October 2015, i.e. prior to the further liberalisation in regulations for foreign direct investment in construction development sector and foreign investment in Alternative Investment Funds and therefore, it does not take into account the changes in sentiment, if any, on account of these developments. However, in our view, the mood across industry has only become more vibrant and exhilarating in the last few weeks.
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 400 internationally renowned real estate professionals, including investors, developers, property company representatives, lenders, brokers and consultants.
The top five investment markets for 2016:
Across the Asia-Pacific region, the industrial/logistics sector continues to be the most popular property type for investment prospects. “Shortages of modern distribution facilities across almost all markets ensures that demand will continue to grow, especially in China,” says the report. It notes that demand is being driven by the need for rapid delivery resulting from the e-commerce boom, buildout in the cold-food chain, and structural changes in regional manufacturing as operations move to emerging markets such as Vietnam.
Overall findings from the report include the following:
About the Urban Land Institute
The Urban Land Institute (www.uli.org) is a 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 nearly 35,000 members worldwide representing all aspects of land use and development disciplines, including more than 1,850 in Asia.
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In India, PwC has offices in these cities: Ahmedabad, Bangalore, Chennai, Delhi NCR, Hyderabad, Kolkata, Mumbai and Pune. For more information about PwC India's service offerings, visit www.pwc.in
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