India’s growth favouring realty
dubai — Non-resident Indians (NRIs) looking to invest in property back home have dual advantages. The affordable price points at which property is available in India today as well as the favourable currency exchange present NRIs with a perfect opportunity, said Dr Niranjan Hiranandani, founder and managing director of Hiranandani Group and Hiranandani Communities, and president of the National Real Estate Development Council.
“We have had currency depreciation on an average between 1.5 to 2 per cent every year for the past several years. In the last four to five years, there has been no currency depreciation because oil prices were subdued. There is a big advantage for NRIs to invest today because properties are 15 per cent cheaper in the last 1.5 years. Real estate was prohibitively expensive earlier,” the real estate veteran told Khaleej Times in an exclusive interview.
The highest share of NRI investment in Indian property annually has been 15 per cent. The average share of NRI investment has been 10 to 12 per cent. This share is likely to grow further this year, although the market base has also expanded. Last year, NRIs accounted for less than 10 per cent of overall property investment across India.
The Hiranandani Group has been seeing active interest in its properties from NRIs based in Dubai and Singapore since the
There is no country that is growing at the pace of India. Infrastructure development is also happening at an unprecedented pace in India... that’s the reason for our bullishness
Dr Niranjan Hiranandani, Founder and MD of Hiranandani Group and Hiranandani Communities and president of the National Real Estate Development Council
7.5% Economic growth being enjoyed by India
past two months. Dr Hiranandani cited demonetisation, the Real Estate (Regulation and Development) Act (Rera) and the insolvency law as three key changes that impacted the Indian property industry in 2017.
“For new projects, an escrow amount needs to be maintained for 70 per cent of the amount which has been deposited. Specifications and agreements need to be registered with the authorities. There are penalty clauses for delays and refunds if the delay is excessive. All these provisions benefit the customer. Buyers are 100 per cent secure in new projects. We are still working to redress problems in old projects launched before the regulations were introduced,” he explained.
Investors in Indian real estate target both rental yield and capital appreciation. On an average, returns on residential property in India have ranged from two to three per cent. Property prices have increased by 10 to 12 per cent per annum.
So, property investors have been earning between 12 to 14 per cent per annum year-on-year over the last 10 years. “This has been the case in metros and Tier 2 cities. The peripheral areas of cities where new townships have come up have grown much faster. Industrialisation and infrastructure development are driving up prices in the peripheral areas of metropolitan cities,” Dr Hiranandani added, citing Oragadam in Chennai and Thane in Mumbai as examples.
Referring to Mumbai, Pune and Chennai as property hotspots for NRIs, the senior executive said there is a supply overhang of 250,000 units in Noida, which will take 10 years to absorb the inventory. Existing stock will be absorbed in two years in Mumbai and 1.5 years in Pune.
“Some developers have stopped new launches since they cannot cater to the new regulations. We have increased our launches threefold. There is an opportunity in this environment for nimble companies. There is a bigger opportunity for business in the next five years than there was in the previous five years,” Dr Hiranandani said on a bullish note.
The Hiranandani Group will launch a township in Alibag, Mumbai, in the first half of 2019. It will include nine hotels, a country club, timeshare, watersports, villas, rowhouses and multi-storeyed buildings. The developer sold $1 billion worth of commercial property in Powai, Mumbai, to Brookfield Asset Management. It is also undertaking three logistics and industrial projects in Pune, Oragadam and Nasik in 2019.
Hailing India’s growth at 7.5 per cent per annum, he said China has been growing at 6.8 per cent per annum. “Barring China, there is no country that is growing at the pace of India. Infrastructure development is also happening at an unprecedented pace in India. Housing growth is a consequence of both. That’s the reason for our bullishness,” Dr Hiranandani concluded.