Emerging Investment Opportunties in Real Estate in India

Realty is a low-risk, high yield investment avenue with a long-term appreciation value.
It is not a volatile domain like the stock market. If 2002 was the year for debt, 2003-2004 for equity 2006-2007 could well be called the year of realty investment.

Newer opportunities are arising for the discerning investor.

(1) Investment in Preleased Properties

The tremendous growth of the retailing industry coupled with entry and success of multinational companies in India, has led to commercial premises being leased out by the developers & property owners on long lease.

With rate of interest on savings & bank deposits falling to 6%, investment in pre-leased properties are now becoming a better option for investors as return on investment in properties yield a 10% to 12% of return on investment.

Easy facilitation of loan by banks & financial institution and choice of property leased to retailers & multinationals are all making investment in realty a profitable proposition.

The Union Government has considerably eased entry norms for investment in real estate by non-resident Indians. As the Indian Rupee is slowly but surely getting stronger and the desire to buy property in their homeland, the non-resident Indians are eyeing to heavily invest in India.

The residential market has been bullish, as has the retail market, owing to increasing demand from retailers, higher disposable incomes and increasing consumerism.

When it comes to leasing out flats, investors can rely on the increasing number of IT/ITES companies that have raised the demand for modern, sophisticated and hi-tech rented space. The two most active investor segments are High Net Worth Individuals (HNIs) and Financial Institutions and Non Indian Residents.

In India, returns from real estate investment are usually higher than in other Asian countries.

Mumbai, Bangalore & Delhi have emerged as the top three investor choices for real estate investment in 2006-7.

Investing in Indian cities is on the top of the agenda of the institutional investors across Asia-Pac and North America. It is likely that cross-border capital of $500-700m will be invested here through JVs, wholly-owned subsidiaries, subscriptions to cross-border funds dedicated to India and mezzanine transactions in the next few quarters.


(2) Realty Focused Private Equity Funds

ICICI, Kotak, IndiaReit all who have launced domestic realty focussed private estate equity fund are now targeting individual investors, with a miimum investment of Rs 25 to Rs 40 lacs. The investor is guaranteed a minium 10% return, with the returns going as high to 24 %.


3) Foreign Direct Investment in Real Estate
Major overseas real estate developers, real estate investment trusts (REITs) and venture funds alraedy opened shop in India.

FDI is expected to touch a figure of $10 billion.

(4) Real Estate Investment Trust (REIT)

The probable onset of REIT’s in India in the ever-increasing list of significant trends in the property market. REIT or Real Estate Investment Trust once allowed in the Indian market would become a medium of convenient investment for developers and small investors intending to invest in real estate. REIT allows you to buy shares in the property, the trust hold and invest in real estate through them.

There are many distinct advantages of investing in real estate via the REIT route. First, the returns are passed on to the investor with transparency of transaction and regularity, as opposed to direct investment, where a builder may or may not pass the returns on to the investor or delay the procedure for various reasons. These could be for purposes of maintaining liquidity or siphoning the funds to other ongoing project. Second, it takes the cumbersome effort out of investing in a large and diversified real estate portfolio, with the right product mix, that ensures greater returns. Third, the investor need not worry about his/her lack of local property knowledge and can invest in real estate, across cities. Fourth, with this corporate avatar of real estate investment, the Foreign Investor fears of investing in an alien unorganized market will be allayed. Fifth, the advent of the REIT will also help reduce the volatility of the market in general and lastly, they are relatively high yielding when compared to other forms of real estate investment.




Contributed By : Sangeet Kumar