Investment Opportunities in the Indian Real Estate Market
The Indian government now permits foreign investment in construction projects in the commercial and residential sectors. This includes residential housing, commercial offices, hotels, hospitals, resorts etc. There are certain conditions though. They are:-
- Minimum of 25 acres of land is required for a residential development.
- Minimum of 50,000 square meters of land is required for non-residential development.
- When the project is a mix of both commercial and residential development, either of the above conditions should be satisfied.
- All local land usage guidelines should be followed.
- Within six months of starting of a joint venture or subsidiary, the foreign capital must be invested in India.
This has resulted in the heating up of the real estate market and property experts believe the demand to go up further once the actual capital starts coming in.
The three top cities for real estate investors in 2005 are New Delhi, Mumbai and Bangalore. According to the Asian Annual Investor Sentiment Survey conducted by Jones Lang LaSalle, these three cities will continue to attract residential and commercial investment. The overall projection was neutral to positive outlook in the short term (i.e. 12 months), with Mumbai and Bangalore topping the list (1.13) and Delhi following next at 1.17. The survey also concluded that people are becoming more cautious in short term market (the average sentiment index has gone up to 1.62 as compared to 2004’s figure of 1.33). Other reasonable factors are fear of hike in US federal rates and weakening of US dollar. The good news is that the average in the medium term market was 1.54.
Although the sentiment in this sector is strong, you need to be cautious. Timing as well as information is very important. For example, in New Delhi, once it was finalized that Delhi Metro will pass through Dwarka (a locality within Delhi), the prices in the area almost doubled.