Real-Estate Prospects
The following factors are helping to make the real estate sector in India a very attractive medium to long term investment proposition provided that a well researched, relative value driven strategy is followed:
Urbanisation
- Sustained economic growth encourages migration of people into cities – this is known as urbanisation. As a result, the new businesses and jobs created will require office spaces, retail outlets and residential development.
Primary market driven
- India has the world’s largest primary driven real estate sector with many people just beginning to purchase their first home. Most developed nations have a small primary but substantial secondary market where families are moving or upgrading their homes. Mortgage issuance is still in the infant stage relative to the developed economies and hence the real impact of leverage is yet to be seen.
Income per capita growth
- Per capita income in India has risen from US$460 in 2001 to $800 in 200. India’s finance minister P Chidambaram recently said “By 2016/17, per capita will be $2,000 if we grow at 9 percent. By 2025, per capita would be $4,000 and that will make us a middle-income country” This means spending power will increase and allow more home ownership as well as increase discretionary spending resulting in increased in retail demand.
Foreign investment
- According to Cushman & Wakefield, a global property consultant, investors such as prominent global players Blackstone, Morgan Stanley, Goldman Sachs and JP Morgan have raised US$30bn since March 2005 for investing in Indian real estate. Real estate now accounts for 26% of all private equity investments with Warbug Pincus being the largest investor in this space having recently raised $15bn for investment in India. Warburg Pincus has been investing in India for over 10 years and has been extremely successful due to its patience and focus on the infrastructure sector (their approach is to “build the road not the car”).
