The Hindu Business Line : `India on radar of many cross-border real estate investors'

While the current cross-border investment activity is currently dominated by Singapore firms, other Asian players, and US opportunity funds, a number of European players are also looking at options to enter the market.

New Delhi , June 22

Predicting accelerated investments by domestic and cross-border real estate funds into the Indian market, a latest report by global realty consultant Jones Lang LaSalle has said that suburban offices and residential sectors are likely to offer greatest opportunities in the short term, while the retail sector would be the growth driver in the medium term.

"India is now on the radar screen of many cross-border real estate investors, and a substantial weight of both domestic and global capital is now seeking real estate investment opportunities in India," said the report, titled `Emerging City Winners'.

"The current investment market includes active participation from domestic real estate funds, institutions, high net worth individuals, and local developers. Domestic debt also remains strong as a financing option, primarily in the form of construction finance as well as lease rental discounting."

The report said that for suburban offices, occupier demand would be supported by over 30 per cent annual growth forecast for the IT/ITES sectors and that strong growth in emerging sectors such as telecom, financial services, pharmaceuticals, and biotechnology, would contribute in boosting the demand and broadening the occupier base.

Campus developments are expanding rapidly, and sale and leaseback opportunities are emerging.

On the residential side, favourable demographics, urbanisation, rising incomes, and easier access to finance are fuelling strong demand for residential accommodation.

Retail expansion

According to the report, India offers a huge potential for retail expansion, and the sector was growing in the region of 10 per cent a year.

"Organised retailing currently accounts for only 2-3 per cent of the market, but the sector is undergoing a structural change, with leading domestic retailers going through rapid growth, format migration, and consolidation. Shopping centre construction is high, but most is of poor quality and is strata titled, and vacancy risk is high."

The report added that there was large untapped potential for high-quality shopping mall development.

However, it warned of the numerous challenges facing the Indian real estate market, such as investment risks relating to low liquidity levels, ownership and title issues, short leases and noted concerns over long-term asset price inflation, as well as broader risks of an economy vulnerable to "economic shocks, infrastructure strain and environmental stress."

Mumbai, Delhi, and Bangalore would continue to be the preferred option for many new market entrants, although there are fewer partnering opportunities.

"Mumbai and Delhi will both offer diverse opportunities; Bangalore is firmly established as a global technology hub and its economy is moving rapidly up the value chain."'

Hyderabad, Chennai, and Pune, too were proving to be highly attractive business locations, and are the increasing focus of corporate, retail and residential demand.

Kolkata and Ahmedabad are displaying impressive economic dynamism. Of the smaller cities, the report favoured Chandigarh, Kochi, Mangalore, Mysore, Jaipur, Thiruvananthapuram, and Bhubaneswar.

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