International investors are keen to invest in Indian real estate now more than ever before due to the enhanced liquidity and transparency it offers, a top global real estate expert said.
“The outside view is more positive than the inside view on what I hear from Indian entrepreneurs, who are much more critical about the situation here,” Christian Ulbrich, Global CEO & President, Jones Lang LaSalle Inc., the global real estate consulting firm, said in an interview. “But the outside view is incredibly positive for India,” he said.
Global investors want India to be successful so that it can develop into a matured country providing greater investment opportunities and options for investment, he said.
“There is strong hope that India will be successful because people are now positive with the current government. People believe that he is starting to have real success in what he is doing and India is now catching up [with] China because there was a long period when India was disappointing for international investors.”
He said India is now catching up in transparency which is a good indicator. In the JLL transparency index, India had moved up from 48 four years earlier to 36 in the latest survey among 110 countries. Liquidity is becoming much bigger due to the presence of institutional money mainly of sovereign wealth funds and Pension Funds, he said.
Demonetisation positive
He added that demonetisation was a big, positive development for India. “I can’t judge how it was executed. But the concept behind it is well received internationally. Because corruption is clearly the biggest evil for any country... and institutional investors have received it well.”
Mr. Ulbrich said globally there was strong and increased allocation into real estate so there was much more capital chasing limited products.
“Clearly, institutional investors like to buy top quality buildings. So, there is more money coming into the sector. Institutional investors would like to buy those buildings in markets which are very transparent, which are very liquid and which have a strong rule of law. At the end of the day, they are talking about relatively small number of countries which are taking the bulk of the investment in real estate. This is very important for India,” he said.
He said when there is comparison between China and India, people still look at India in a positive way because it is a democracy where there is rule of law.
Ramesh Nair, CEO & country head, India, JLL Property Consultants (India) said though the December quarter was the worst ever in 30 quarters, still, real estate price on an average rose by 1.2% in 2016 as compared with 3.2% in 2015.
“Contrary to the general perception that the real estate market is crashing and prices dropped 30% after demonetisation, prices across the board in fact went up 1.2%.”
However, he said the sector was heading for consolidation as profit margins were declining rapidly and most developers lacked depth.
“Consolidation is going to happen. Out of the 11,000 developers, very few have depth. We conducted a survey and out of all developers, 240 were found to have depth in the residential segment followed by 40 in the office segment and only 5 in the retail segment. When consolidation happens, a lot of these will be out of business. So, there will be less developers, less buyers and lot more institutional participation,” he said.
