The top five in­vest­ment mar­kets for 2016

Ben­galuru, Mum­bai and New Delhi get high scores in a list of 22 mar­kets in the Asia Pa­cific Re­gion

HT Estates - - HTESTATES - HT Es­tates Cor­re­spon­dents

For­eign in­vestors have given up a thumb­sup to the In­dian f or­eign i nvest­ment pol­icy for the real es­tate sec­tor which has helped the coun­try re­gain favour as a pre­ferred in­vest­ment des­ti­na­tions in the Asia Pa­cific re­gion, says the Emerg­ing Trends in Real Es­tate Asia Pa­cific 2016 re­port, jointly pub­lished by the Ur­ban Land I nsti t ute ( ULI) and Price­wa­ter­house­Coop­ers (PwC).

Ben­galuru, Mum­bai and New Delhi were ranked 12, 13 and 16 by sur­vey re­spon­dents for in­vest­ment prospects and 15, 13 and 11 po­si­tions, re­spec­tively, for de­vel­op­ment prospects in the list of the 22 mar­kets cov­ered in the re­port. While Mum­bai and New Delhi have dropped in rank­ings from an in­vest­ment prospects per­spec­tive ( they were ranked 11 and 14, re­spec­tively in Emerg­ing Trends in the Real Es­tate Asia Pa­cific 2015 re­port), Ben­galuru has shown a re­mark­able im­prove­ment as it has moved up five po­si­tions over its last year’s rank­ing (17th). The re­port at­tributes the surge in Ban­ga­lore’s rank­ings to its tech­nol­ogy in­dus­try and the avail­abil­ity of a large pool of skilled labour nec­es­sary to ramp up the ven­ture cap­i­tal backed star­tups.

The re­port high­lights that Mum­bai is on a re­cov­ery path on the com­mer­cial real es­tate side and, down-town is on sta­ble ground. Delhi and nearby in­dus­trial zones have one the biggest pipe­lines of new sup­ply in Asia and on the ground, oc­cu­pancy prob­lems are fo­cused on B-grade or sec­ondary as­sets rather than the higher-qual­ity build­ings, for which the de­mand re­mains high.

The story in Ben­galuru is, how­ever, dif­fer­ent from that of in Mum­bai and Delhi, where even the huge amount of up­com­ing sup­ply of com­mer­cial of­fice in­ven­tory is not per­ceived to be a cause of con­cern, as it is ex­pected to be matched by an equally high ab­sorp­tion rate.

The out­look seems pos­i­tive; this is ev­i­denced by the fact that 80% of the for­eign cap­i­tal in­flows have been all-equity buy­outs by big in­sti­tu­tional play­ers. Even those in­vestors who had burnt their fin­gers in the first round of in­vest­ments in 2006-07, are not wary of In­dian mar­kets any­more, and are will­ing to bet their money once again on the In­dian real es­tate story.

The Emerg­ing Trends re­port pro­vides an out­look on Asia Pa­cific real es­tate in­vest­ment and de­vel­op­ment trends, real es­tate finance and cap­i­tal mar­kets, and trends by prop­erty sec­tor and metropoli­tan area. It is based on the opin­ions of more than 400 in­ter­na­tion­ally renowned real es­tate pro­fes­sion­als, in­clud­ing in­vestors, de­vel­op­ers, prop­erty com­pany rep­re­sen­ta­tives, len­ders, bro­kers and con­sul­tants.


Tokyo (ranked first for in­vest­ment and de­vel­op­ment) – Tokyo “ticks all the boxes” for in­vestors given its sta­tus as Asia’s top gate­way city, and the mar­ket with the great­est depth and liq­uid­ity. Still, de­spite the con­tin­u­ous heavy ac­tiv­ity fu­elled by easy credit and low in­ter­est rates, some are wary that the mar­ket is slow­ing. While the short-term out­look is favourable, a slow­down, ac­com­pa­nied by price stag­na­tion or de­clines, could prove prob­lem­atic for those need­ing to re­fi­nance high loan-to-value loans in the fu­ture, the re­port cau­tions.

Ho Chi Minh City

Ho Chi Minh City (fifth for in­vest­ment, fourth for de­vel­op­ment) – Ho Chi Minh City’s rat­ing has soared over the past two years, jump­ing from 19th place in 2014 to one of the top five for 2016.The re­port at­tributes its surge in pop­u­lar­ity to suc­cess­ful ef­forts by the gov­ern­ment to sta­bilise the lo­cal cur­rency and keep in­fla­tion in check, cou­pled with a re­vival of real es­tate lend­ing by banks. In ad­di­tion, im­proved mar­ket ac­cess for for­eign­ers is draw­ing out­side in­vestors, who could sig­nif­i­cantly boost pur­chases of both res­i­den­tial and com­mer­cial prop­er­ties.

Across the Asia-Pa­cific re­gion, the in­dus­trial/lo­gis­tics sec­tor con­tin­ues to be the most pop­u­lar prop­erty type for in­vest­ment prospects. “Short­ages of modern dis­tri­bu­tion fa­cil­i­ties across al­most all mar­kets en­sures that de­mand will con­tinue to grow, es­pe­cially in China,” says the re­port. It notes that de­mand is be­ing driven by the need for rapid de­liv­ery re­sult­ing from the e-com­merce boom, build­out in the cold-food chain, and struc­tural changes in re­gional man­u­fac­tur­ing as op­er­a­tions move to emerg­ing mar­kets such as Vietnam.


Syd­ney (sec­ond for in­vest­ment and de­vel­op­ment) – Syd­ney is a draw for in­sti­tu­tional in­vestors seek­ing core of­fice prop­er­ties. The short­age of those as­sets and an in­flux of new in­vestors com­pet­ing for the prop­er­ties, cou­pled with a de­pre­ci­ated lo­cal cur­rency, are re­sult­ing in strong prop­erty yields. Real es­tate in Syd­ney is also ben­e­fit­ing from the trans­for­ma­tion of Aus­tralia’s econ­omy from a com­modi­ties-driven to a ser­vice sec­tor-driven model. In ad­di­tion, a sig­nif­i­cant num­ber of of­fice-to-res­i­den­tial con­ver­sions and re­de­vel­op­ment projects have drawn in­vestor in­ter­est.


Mel­bourne (third for in­vest­ment and de­vel­op­ment) – Mel­bourne is per­ceived as of­fer­ing a sim­i­lar en­vi­ron­ment to Syd­ney. How­ever, even with dou­ble-digit price in­creases in 2015, prop­er­ties in the city re­main more af­ford­able than those in Syd­ney, mainly be­cause more land is avail­able for an ex­pan­sion of the cen­tral business dis­trict (CBD). Ab­sorp­tion re­mains strong, both from newly ar­rived busi­nesses and those mov­ing from the sub­urbs to the core of the city.


Osaka (fourth for in­vest­ment, fifth for de­vel­op­ment) – Osaka con­tin­ues to ben­e­fit Tokyo’s “spillover de­mand,” as in­vestors mi­grate to the smaller city where com­pe­ti­tion is not as stiff. Yields for res­i­den­tial prop­er­ties are par­tic­u­larly strong, al­though com­mer­cial as­sets are also per­form­ing well. The mar­ket’s im­pres­sive growth “marks the end of a long pe­riod of over­sup­ply that plagued the city for years,” notes the re­port.


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