|
|
| |
India: Look houseward,
angel
By Srivastava Siddharth
NEW DELHI - This is the year that non-resident
Indians - NRIs for short - are returning to India's
real-estate market. Whether in the political or
financial capitals of Delhi or Mumbai or the
information-technology (IT) hubs of Bangalore or
Hyderabad, Kolkata or Chennai, the property market is
buzzing with renewed interest from overseas Indians who
are returning to buy property in their home country.
"In the last few months bookings by NRIs have
gone up threefold," said T C Goyal, managing director of
DLF Universal, which has developed several properties at
Gurgaon, New Delhi's satellite town. "The bookings are
for investment as well as to live if they shift."
In the early 1990s, a zooming real-estate market
that turned speculative and went bust burned many
investors. A host of multinational corporations (MNCs)
flooded into India in the post-economic-liberalization
era after 1990. The lack of ready property stock,
numerous government restrictions and the exponential
increase in demand led to an astronomical rise in rental
and capital values.
In the mid-1990s, as
companies started to consolidate operations, the
government began to get its act together and the demand
left over from the earlier period triggered new supply,
which drove down prices even more. The markets have thus
sobered considerably. This time the story is likely to
be different, Goyal says. The past two years, however,
have seen both domestic and international investors
flocking back to the real estate market.
"Now,
the boom is end-user-driven rather than
supplier-driven," Goyal said.
An indication of
increased interest can be gleaned by the marked increase
in the approved loans for NRIs by HDFC Bank, the leading
housing-loan provider. It has risen from Rs4 billion in
2001-02 to over Rs6 billion (more than US$130 million)
in 2002-03 and is expected to go even higher this
financial year. This has been accompanied by a more than
threefold increase in overall housing finance in the
past five years.
For non-resident Indians, a
combination of indirect factors and genuine structural
amendments has brought about the change. The
long-running US economic slowdown and the end of the
dot-com bubble have meant that overnight pink slips are
being handed to employees of foreign origin and there is
talk of capping the H1-B visa quota, which liberalized
the entry of tech-savvy migrants to the United States.
"NRIs don't know what is going to happen next
and are purchasing property in case the situation
worsens," says Prasad Vijayapuram, general manager,
marketing, Brigade Group in Bangalore where NRIs are
pushing up the demand for residential premises.
However, this is only part of the full picture.
Analysts point to the genuine maturing of the
real-estate market, which is growing with government
backing given the country's comfortable foreign-exchange
position and a bit of economics.
The surge in
demand also follows changes in investment laws that
allow NRIs to freely move their investments in and out
of the country. The government permitted repatriation of
rental income every year in the announced budget for
2002-03 as well as proceeds from the sale of property
purchased through overseas sources, without a lock-in
period.
"Many NRIs have converted to
non-resident external accounts, which are fully
repatriable," said Sunil Gupta, a chartered accountant
who deals with several NRI clients.
The
government has also allowed 100 percent foreign direct
investment in real estate, subject to certain
restrictions, and may soon allow housing finance
companies to float mutual funds to invest in real
estate. Property prices have fallen to the point where
the real-estate market has largely bottomed out. This
comes at a time when fixed deposit interest rates are
below 6 percent while rental returns are pegged at 9-14
percent.
"We are witnessing a desire for housing
loans from the NRI community as interest costs at 8
percent have never been lower," said Rajiv Sabharwal,
chief operating officer of ICICI Home Finance, which has
expanded its activities abroad to regions of high NRI
concentration.
"We are providing home loans out
of our branch in Dubai and are exploring the possibility
of catering to the Indian population in the US and the
UK," Sabharwal added.
"As much as 70-80 percent
of the demand is coming from software services and
business and processing [BPO] companies," said DLF
Universal's T C Goyal. Individual NRIs are pouring money
across markets within the country. Mumbai, where an
estimated 20 percent of money in real estate is by NRIs,
is no longer the only haven.
Indeed, the NRI
interest comes when construction is at an unprecedented
scale to meet the soaring needs of the country's
high-tech sector. In the next 12 months, about 743,000
square meters of new offices are expected in cities such
as Bangalore, Delhi, Mumbai, Hyderabad and Chennai. That
is expected to increase to more than 2.2 million square
meters in the next 36 months.
"It's a building
boom of amazing proportions," said Sushil Ansal,
chairman of Delhi-based Ansals Properties. The frenetic
construction activity is happening in all the major
metros at almost equal speed - though Bangalore leads
the way, followed by Gurgaon. "NRIs have never shown
more interest in buying property back home, barring the
period 1993-96."
In Bangalore, the Prestige
Group is building 186,000 square meters of office
blocks. In Gurgaon, DLF Universal hopes to put in place
about 186,000 square meters for blue-chip corporate
clients. In Hyderabad, Larsen & Toubro and the K
Raheja group have major plans. In Bangalore, Intel, SAP,
Texas Instruments and Motorola have taken over 28
hectares of land.
"The investments are being
made after closely studying the markets and taking an
informed decision about any location in the country,"
says a recent report by Cushman & Wakefield.
The Confederation of Indian Industry (CII) has
said that Mumbai is rapidly losing out to Delhi and
Hyderabad. Even low-cost housing in Kolkata is seen as a
role model. Recent global research conducted by
real-estate consultants Jones Lang LaSalle and LaSalle
Investment Management predicts that Mumbai and Delhi
will face increasing competition from India's
second-tier cities - Bangalore, Chennai, Hyderabad and
Pune.
"Bangalore is moving from an IT
back-office location to a full-fledged IT hub, with
cutting-edge research combined with low value-added
services," the consultant said. Properties with the
potential of being leased out to MNCs, large
corporations, banks or embassies are the most in demand.
"In Mumbai and Delhi, lease rentals are as high
as 10-13 percent of the value of a residential property
and 13-14 percent for furnished apartments and offices,"
Goyal said.
According to the Cushman &
Wakefield report, much of the buying interest is focused
in the suburbs for prime apartments and penthouses. In
the capital, NRIs are attracted to farmhouses. This is
followed by retail space in malls and offices.
"Earlier developers were focusing on
middle-class apartments in the range of [Rs800,000-Rs1
million]. With the NRIs coming in, the demand for
housing in the [Rs5 million to Rs6 million] range has
gone up," Ansal said.
Analysts say, though, that
this time strong fundamentals are backing the
real-estate boom, and more needs to be done. "Though the
government has allowed flexibility in rent and dividend,
there are still bottlenecks - capital gains cannot be
repatriated," Gupta said. "There is still no real
capital account convertibility. Only savings that NRIs
remit into India can be taken back. This is nothing
new."
Ansal points to a problem that had beset
the Southeast Asian countries. "Oversupply led to the
property prices crashing," Ansal said. "Since the boom
is IT-BPO industry driven, it becomes important to
ensure that too much is not created."
Sabharwal
points out that the interest rates on housing loans need
to go down further. In the end, though, most industry
players agree that the spurt is genuine and not a
speculative rise that should be calibrated for further
gains.
(Copyright 2003 Asia Times Online Co,
Ltd. All rights reserved. Please contact content@atimes.com for
information on our sales and syndication policies.)
|
| |
|
|
 |
|
| |
|
|
|
| |
|
|
|
|
|
