SLOWDOWN, TERROR ATTACKS AND NRI REALTY SENTIMENTS
Sanjay Dutt – CEO (Business) Jones Lang LaSalle Meghraj
There already has been an overall slowdown from all investor classes because of the current economic pressures. That said, the Mumbai terror attacks have awoken the patriotic sentiments of the NRI community and there has been no visible backlash of these events in terms of reduced NRI interest. In fact, these attacks will have no long-term repercussions on demand for residential space in South Mumbai, either. Bandra is, in any case, of greater interest to NRIs than South Mumbai, since Bandra has more amenable rates and also a fresh crop of excellent projects. Meanwhile, South Mumbai continues to be a highly desirable residential hub for the HNI segment. The only real effect of these terror attacks will be in the hospitality sector, and even that is a transient phenomenon.
The fact that prices are falling in Indian real estate has, in fact, sparked off a new wave of interest among NRI residential property buyers. It is too early to talk about transaction magnitudes, but significant interest definitely exists. In terms of intent, the participation of Non Resident Indians in Indian real estate projects is still quite notable. However, they are awaiting a fall in property rates. Once this happens in the next three to four months, we will see increased NRI participation in ‘real’ terms. We expect a number of scheduled transaction to happen by the end of the first quarter of 2009. However, NRIs will stay away from unfamiliar, historically over-speculative Tier II/III cities and focus more on markets that they understand and know to have investment potential.
Apart from residential units for self-use, NRIs tend to invest in income-generating assets, with an emphasis on commercial spaces. In the wake of the slowdown, their preferences in this regard are undergoing a marked sea-change. Up until recently, they would invest in projects that promised satisfactory ROI – now, they prefer to pick up only existing, fully-leased assets by reputed developers. These would primarily include projects by developers who were intending launch IPOs and now need to unlock capital to fund new ventures. Also, NRIs will tend to steer clear of investments in retail projects.
The developer community continues to take cognizance of the NRI potential, and there has been a slew of incentives and attractive financial structures offered by them to attract buyers from this segment. Also, the developer community is lobbying the Government to introduce policies that will make real estate investment more attractive – and they are beginning to get results. However, the only real catalyst will be reduced property rates.
Of course, India is not the only country that NRIs are eying for realty investment. After the sub-prime crisis fallout in the US, NRI investors have woken up to the potential there. However, they also aware that the meltdown has created attractive investment opportunities in India, as well. It is generally known that markets in developed countries do not have the growth potential of those of emerging economies such as India. Moreover, NRIs invest in India for more than just financial reasons – for expatriates, there is a large component of sentimental value attached to owning a home in India. Many NRIs plan to repatriate at some point in time – and this fact alone is ensuring that India remains a priority investment choice for this segment.
Sanjay Dutt – CEO (Business) Jones Lang LaSalle Meghraj
There already has been an overall slowdown from all investor classes because of the current economic pressures. That said, the Mumbai terror attacks have awoken the patriotic sentiments of the NRI community and there has been no visible backlash of these events in terms of reduced NRI interest. In fact, these attacks will have no long-term repercussions on demand for residential space in South Mumbai, either. Bandra is, in any case, of greater interest to NRIs than South Mumbai, since Bandra has more amenable rates and also a fresh crop of excellent projects. Meanwhile, South Mumbai continues to be a highly desirable residential hub for the HNI segment. The only real effect of these terror attacks will be in the hospitality sector, and even that is a transient phenomenon.
The fact that prices are falling in Indian real estate has, in fact, sparked off a new wave of interest among NRI residential property buyers. It is too early to talk about transaction magnitudes, but significant interest definitely exists. In terms of intent, the participation of Non Resident Indians in Indian real estate projects is still quite notable. However, they are awaiting a fall in property rates. Once this happens in the next three to four months, we will see increased NRI participation in ‘real’ terms. We expect a number of scheduled transaction to happen by the end of the first quarter of 2009. However, NRIs will stay away from unfamiliar, historically over-speculative Tier II/III cities and focus more on markets that they understand and know to have investment potential.
Apart from residential units for self-use, NRIs tend to invest in income-generating assets, with an emphasis on commercial spaces. In the wake of the slowdown, their preferences in this regard are undergoing a marked sea-change. Up until recently, they would invest in projects that promised satisfactory ROI – now, they prefer to pick up only existing, fully-leased assets by reputed developers. These would primarily include projects by developers who were intending launch IPOs and now need to unlock capital to fund new ventures. Also, NRIs will tend to steer clear of investments in retail projects.
The developer community continues to take cognizance of the NRI potential, and there has been a slew of incentives and attractive financial structures offered by them to attract buyers from this segment. Also, the developer community is lobbying the Government to introduce policies that will make real estate investment more attractive – and they are beginning to get results. However, the only real catalyst will be reduced property rates.
Of course, India is not the only country that NRIs are eying for realty investment. After the sub-prime crisis fallout in the US, NRI investors have woken up to the potential there. However, they also aware that the meltdown has created attractive investment opportunities in India, as well. It is generally known that markets in developed countries do not have the growth potential of those of emerging economies such as India. Moreover, NRIs invest in India for more than just financial reasons – for expatriates, there is a large component of sentimental value attached to owning a home in India. Many NRIs plan to repatriate at some point in time – and this fact alone is ensuring that India remains a priority investment choice for this segment.
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