Warning over opening Indian property market to foreigners

A Paradise group staff talks to a potential buyer at the Indian Property Show in Dubai. Sarah Dea / The National

Above, visitors view a scale model of a New Age Realty project at the Indian Property Show. Sarah Dea / The National

Figures from CBRE forecast that India’s property market will be worth $180 billion by 2020. Above, a scaled version of a project on display at the Indian Property Show. Sarah Dea / The National

The developer Xrbia Group recently unveiled plans to try to meet 1 per cent of this need by building one million new homes in 100 proposed new cities. Sarah Dea / The National

The three most favoured locations of property investors in India are Mumbai, Bengaluru and Pune. Sarah Dea / The National

Opening the Indian property market to foreigners could widen the gulf between supply and demand in the country, making properties unaffordable to nationals.

Although there has been some liberalisation of foreign domestic investment rules since the prime minister Narendra Modi came to power last year, this has largely been limited to corporate buyers and the market remains closed to individuals.

Sunil Jaiswal, the president of Sumansa Exhibitions, which organises the Indian Property Show in Dubai, said that this was a good thing.

“If they did [liberalise], we would see a skyrocketing of prices, and it would not be good for the economy,” Mr Jaiswal said. “I think India has a shortfall right now of about 20 million housing units. You do not really want other people coming in because there is enough domestic demand.”

India has a population of close to 1.3 billion people, which is predicted to rise to 1.6 billion by 2050. Its housing shortfall is likely to widen to 100 million by 2030, according to the developer Xrbia Group, which recently unveiled plans to try to meet 1 per cent of this need by building one million new homes in 100 proposed new cities.

Its founder Rahul Nahar says: “It has been predicted that by 2030, our cities will be home to 800 million people. Which means 70 per cent of India’s total population will live in cities.”

Xrbia builds large townships with integrated infrastructure connections and community facilities such as schools, hospitals and entertainment units.

It can build quickly, with four-storey buildings typically being turned around in 90 days, and cheaply – prices start from 1.3 million rupees (Dh75,000) for an apartment to 4.3m rupees.

The value of properties at the most recent edition of Dubai’s bi-annual India Property Show this month varied massively in range, with Xrbia’s budget units displayed alongside Mumbai penthouses costing 500m rupees from The Wadhwa Group and Lodha Developers.

“And the thing about India is they could be almost next door to each other,” said Mr Jaiswal.

Figures from JLL forecast that India’s property market will be worth $180 billion by 2020, while a survey of 15,000 show visitors by Sumansa Exhibitions into favoured locations placed Mumbai (cited by 33 per cent), Bangalore (26 per cent) and Pune (16 per cent) in the top three.

CBRE reported that the volume of residential sales fell by 30 per cent last year and the number of new homes fell by 25 per cent, with buyers concerned that prices are already too high. New Delhi, Bangalore and Chennai were the markets registering the most significant declines.

“Regardless of its speed of growth, the fact remains that the Indian real estate sector is dynamic, and long-term investments into it will pay off very well as long as the investment decision is sound,” said Ashwinder Raj Singh, JLL’s India’s residential services chief executive.

Those manning the stalls at the show were hoping that the rupee’s recent devaluation against the dirham – Dh1 will now get you 17.5 rupees, compared to 14 rupees last year and 12 rupees five years ago – would encourage non-resident Indians in Dubai to spend big. Lodha Developers was exhibiting its World Towers project, with apartments designed by Armani Casa selling for 500m rupees and a Jade Jagger for Yoo-designed apartment scheme called Lodha Fiorenza, where typical units cost about 50m rupees, according to the assistant general manager Praytush Kumar.

It was also promoting a Mumbai project – its first in the Thane district for three years, which will comprise 3,000 apartments. Its worldwide launch is due to take place on Saturday.

“Most of the investors want to buy off-plan because they want capital appreciation,” said Arjun Nayar, assistant general manager of international sales at Kalpataru, which has an office in Dubai’s Jumeirah Lakes Towers. “Property in Dubai will not give you that, but it will give good rental yield.”

Yet Mr Jaiswal urged caution against thinking currency movements were a one-way bet.

“If it went the other way, properties would maybe be 25 per cent more expensive than they are. So I always encourage people to look at that exchange rate and be very careful about making long-term decisions based on what the rate is today.

“Can you still afford to make those payments each month? Because if you cannot, you are going to be put under stress.”

He added that NRIs will take a longer-term view – either because they are buying investments to hold, a home for the future, or both.

“If you are looking at five or 10 years, it is very unlikely that things are not going to work out.”

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