The real estate sector in India will continue to recover on the back of a resilient Indian economy and strong capital inflows, said Anuj Puri, Chairman & Country Head, JLL India.

“Brexit will not disturb that recovery much, since India’s office market leasing is dependent only by 5-7 per cent on UK-headquartered companies, and investments and activity of PE Funds from EU countries is more in India than in the UK,” he added.

In a risk-off mode

Investors now are in a risk-off mode, meaning more number of investors would either pull out investments or stay put without investing further until clarity emerges.

When economic recession hit the US, Indians took up a leading position among investors keen to take advantage of the falling property prices there. The British Pound is currently at a 31-year low, which itself provides an attractive rationale for foreign investors with an appetite to do so to acquire properties in the UK.

According to Puri, investors in the UK looking to invest in residential properties outside UK will have to study and compare returns and risk assessments for real estate in India versus real estate in the EU. After exiting EU, locations such as Greece, Spain and Portugal may not remain as attractive to UK investors, and India may benefit from that.

“There is no doubt that the UK – particularly cities like London – has always held a special attraction for Indians, particularly HNIs, with business interests or families there. Such individuals will certainly keep a close watch on the effect of Brexit on UK’s property prices, and it is very likely that many more Indians will seek to invest there,” explained Puri.

According to Puri “Until today, India was looking seemingly positive for real estate sector in terms of investment inflows (read PE or FDI inflows), but now that is somewhat at risk.”

Short-term volatility

The impact on Indian residential and commercial property will be short-term market volatility. Potentially, and in selective instances, pricing could come under pressure, said Shishir Baijal, Chairman and Managing Director, Knight Frank –India.

“The vote to leave the EU increases near term risks facing the UK economy. An interest rate cut by the Bank of England is a strong possibility, as is more quantitative easing,” he added.

Baijal explained that “In light of the above risks we expect the Bank of England to respond quickly. An interest rate cut of 25 basis points is a strong possibility at the Monetary Policy Committee’s meeting in July, or perhaps earlier if required. We may also see a return of quantitative easing, if there are signs that investment is deteriorating. This we see coinciding with a devaluation of the pound.”

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