PROPERTY MARKET ANALYSIS have proposed India as an investment location with long-term economic prospects. Indeed, that country has proved to survive the global economic crisis. Apparently, the recovery of its property market has mainly been due to the roles played by low and middle class consumers. Some data show that there is no more doubt about India’s economy experiencing quite good growth despite the global recession that started last year. The International Monetary Fund even estimates that the India’s economic growth will reach 5.4 percent this year.
Moreover, India is in the list of 10 countries most popular as foreign investment destinations, according to Property Abroad.com. This shows that foreign investors have dared to come back to markets in developing countries especially their property markets.
Les Calvert, Director of Property Abroad.com, said, “We knew that emerging markets would come back just as strongly, because they quite simply cannot be equaled in terms of potential profit. In the bigger emerging markets like India especially, property can be bought very cheaply, and demand is rising far faster than supply, which puts incredible upward pressure on prices.”
Write About Property says that India’s growth has been pushed up by the middle class. This happens because India has a very big population, the majority of which are low and middle class earners. Most of them cannot afford to buy or rent houses. So far developers in India have focused on developing luxury homes for foreigners.
They are not aware that low and middle income earners provide a market with big potentials. Investors should now look at this situation and divert their investments. Rising demand for residences in India that has exceeded supply has made it one of the best investment locations in 2009. It is advisable therefore that anyone intending to buy apartments or houses in any city in India buy them in its suburban areas that are being developed as level 2 or 3 locations.
In such locations rental prices can rise easily by 6-8 percent, and capital can increase by at least 10 percent per year. In the long term, possibilities remain for a rise in luxury property demand. Opportunities remain open for buying luxury property assets at a discount. Such assets can be rented out for short-term profits and can be sold after 10-15 years. However, the future of India is predicted to also depend on the condition of its population currently dominated by middle and low class people.
They are potential targets that can support the country’s property market to develop further. Developers in India have become aware of that situation and they are now trying to divert their investments and diversify their market segments. They are trying to build cheaper houses. Slowly but surely, with houses offered at reachable prices, around 300 million middle class people will become their potential buyers and eventually will be able to own houses.
Government Efforts Like developers, the Indian government had concentrated on luxury property that actually is attractive to few wealthy individuals or companies. But, it has now become aware of its mistakes and has begun to give more serious attention to middle and low class locations. As such, its development plans have included such locations in order to improve them.
Also, state banks have been involved in reducing interest rates so as to raise liquidity flows, which is viewed as benefiting buyers who buy first property assets. Koshy Varghese, managing Director of Bangalore-based developer, Value Designbuild, suggests, “The property sector must be given the status of an industry thereby allowing access to cheaper credit and easier access to loans. Bank finance is still very expensive.”
Moreover, in an attempt to further boost the Indian market, the government is making serious efforts to bring in investors. It also has changed its policies. In the past, foreign investors were only allowed to invest their capital in projects of 25 acres at least. At this time, however, they can invest their money even in smaller acres. With such policy changes, India hopes it will be able to attract foreign investors to build property in a number of locations like Mumbai, Delhi, Bangalore, Chennai and Hyderabad. India has issued investment guidelines that were prepared by The Department of Industrial Policy & Promotion (DIPP).
They are expected to be able to attract more foreign investors to come to that country. As such, the government can minimize the amounts of capital for developing hospitality projects and tourist facilities like hotels, restaurants or recreational facilities for tourists. Property market players welcome such initiatives, saying that they will be able to support high-valued projects in Indian cities and other projects being carried out in the country’s tourism sector. (JR)