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02/05/07 - Property
Market in India Booming |
The economy and
property market in India are booming and there appears to be no limit to
growth prospects. Assetz explores whether the optimism has a firm
foundation…
Last week Hena Kishore, a property consultant for Sternon, said India was
not only "emerging very strongly as a property market", but a completely
risk-free market where the legal basis of buying property gave the buyer
full protection and the strength of the economy was attracting buyers en
masse. Hers was a thoroughly upbeat assessment.
But which are the property hotspots? Ms Kishore said Mumbai and Goa were
particularly popular because of their appeal to westerners, especially as
holiday destinations. That, of course, is good news for the buy-to-let
industry. But for more evidence of where the best prospects are for property
investors, it is perhaps best to study where the money is going.
According to a report today by Reuters, reproduced in Pakistan's Daily
Times, the bulk of the investment is heading where the best roads and
airports are. In the case of tourist destinations, which by their very
nature make the establishment and maintenance of a good international
airport a priority, this is perhaps a case of stating the obvious.
Infrastructure problems remain
However, the article goes on to suggest that problems remain with the
development of infrastructure in certain areas due to what it calls "India's
legendary red tape and ingrained political mistrust of privatisation",
citing the comments of Sameer Nayar, the head of real estate for Credit
Suisse in Asia, who noted delays in constructing a highway between Delhi and
its airport.
What Mr Nayar argues is that developers are gravitating to the locations
where the infrastructure is best established, which the article's author
suggests may create areas of property oversupply. Yet in the same article he
also notes that in some cases the investors themselves are investing in
infrastructure, such as better sewerage and more reliable electricity
supplies.
The investment intentions of different companies may, however, suggest that
any pessimism is misplaced. Reuters in Hong Kong reported last week that
Citigroup's property Investment arm was looking to plough $400 million (£200
million) into property development in India, with the city of Pune the
target of a $125 million housing project, while the same news agency's
Mumbai office reported yesterday that Kotak Realty Funds was raising $350
million for investment in various projects and partnerships.
Moving away from ‘ingrained political mistrust’
If the development of India is haphazard, it may be worth noting the
comments on the country by the Foreign and Commonwealth Office, stating
that: "Economic reforms, initiated in 1991, have placed India firmly on the
path of sustained economic growth."
It adds that these acts of liberalisation followed decades of the economy
being closed. That being the case, it may not be unreasonable to think that
the "ingrained political mistrust of privatisation" could in fact be a
vestige of old attitudes, ones which recent governments are increasingly
moving away from.
Besides this, however, it is also maybe worth considering that in a country
so large, so socially diverse and changing so rapidly, there are bound to be
some problems along the way and some respects in which parts of the country
develop faster than others.
This may well lead to a situation where those looking to invest in property,
including in the buy-to-let market, have to carefully cherry-pick their
locations, but it may also smooth out in time to create the required balance
and stability in the long run.
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