Even though the Indian authorities have made significant changes/improvements to the regulatory structure of the domestic property market, this has not always lead to increased demand and rising prices in the past. However, a number of Indian real estate experts believe 2016 could be the catalyst to an exceptional 2017 and further growth for not only the economy but also the property market. So, what does 2017 hold for the Indian property market?
Indian property in high demand
While we wait for final economic growth figures for 2016 experts believe the Indian economy will have grown by 7.2% in 2016 with expectations of a further 7% growth in 2017. This slight dip in growth next year should be seen in context with Chinese growth of 6.7% this year expected to fall to just 6.3% next year. Economic data suggests that increased domestic consumption is behind the growth in Indian economic activity as the middle classes flex their financial muscle and look for properties reflecting their status.
A number of major financial institutions such as Blackstone and Jones Lang LaSalle, which have previously avoided the Indian real estate market, have now changed their strategy completely. Overseas investors are now pouring billions of dollars into the Indian real estate market on the back of greater demand and improved transparency.
Relatively low household debt
It is easy to forget that India is currently the second most populous country in the world with a population of 1.3 billion which is only bettered by China at 1.4 billion. Interestingly the United Nations forecast that the Indian population will overtake that of China by 2022 which all bodes well for ever-increasing demand for property.
On the whole there is very little household debt in India and the financial sector has certainly matured of late offering more suitable arrangements for property purchases. The recent trend of interest rate cuts by the Indian central bank has also assisted in reducing the headline cost of finance which has again led to improved demand for housing. That is not to say it will be plain sailing all of the way but the current environment certainly assists what many believe is a strengthening in demand for both Indian housing stock and business real estate assets.
Top-ranked cities in India
It will come as no surprise to learn that the likes of Bangalore and Mumbai are attracting significant domestic and overseas investment demand. This increased investment has also filtered through to the property development market with much-needed business premises growing in number. Interestingly, this ongoing investment in business premises/business parks has spread far and wide beyond the likes of Bangalore and Mumbai. So, not only will this increase domestic and overseas investment in these areas but it will also add to the long-term economic strength of India.
Historically the vast majority of domestic and overseas investment in real estate has been focused upon India’s more prominent cities. Slowly but surely this is starting to spread out to smaller cities and larger towns. The key to long-term success of the Indian real estate market is management of the economy, consumer demand and a more transparent regulatory structure, not only for the property market but for other areas of Indian business life.
While the days of alleged corruption may be coming to an end it will still take some time to clear the decks and improve transparency. However, each step to greater transparency improves the confidence in India for both domestic and overseas investors.