Capital returning to Asian markets in a big way
Colliers International’s latest report-Asia Market snapshot –Q2 2018 highlights that despite signs of a slowdown in some areas, such as the flow of Chinese capital into Hong Kong’s property market or sales in the Indonesian residential and office sectors, investors are still eager to seize on opportunities in this fast-growing region.We will continue to witness Asian capital returning to Asian markets in a big way as the yield compression in the E.U. and the U.S. continues with growing optimism in the Asian real estate markets.
“Although the luxury residential sector is still under stress, the mid-income segment volumes have shown signs of revival in the past two quarters. Affordable housing has been driving most of the volumes in the residential sector. On the other hand, commercial real estate absorption has remained strong, showing signs of a robust business environment. With the introduction of GST,there has been increased focus on creating a large logistics network, backed by large ticket private and public investments. The real estate industry across sectors seems poised to end the year on a reasonably decent note as compared to the previous year”saysSuresh Castellino, Executive National Director, Capital Markets and Investment Servicesat Colliers International India.
The residential sector has witnessed significant structural changes over the past two years, as a result of macro-level regulatory developments. Demand for affordable housing has continued to drive residential sales, which is expected to stabilise going forward. On the other hand, well-managed pre-leased office space remains the most sought-after asset for the majority of PE capital into real estate sector. Warehousing and logistics remains a dark horse, with a number of PE-backed platforms looking to set up logistic parks to cater to the huge pent-up demand for grade A facilities in the industry.
Affordable housing remains the main source of demand as the contribution of this segment to overall sales in tier I cities increased, with sales driven by new launches and mid-income and affordable housing. Recent policy decisions such as the enhancement of the carpet area for middle income group customers under the Prime Minister Awas Yojna (PMAY) scheme and the revision of housing loan limits for priority sector lending are seen to fuel optimism among buyers for affordable housing. The Reserve Bank of India (RBI)’s decision to hike key interest rates by 25 bps may dampen market sentiment, but isn’t expected tosignificantly impact sales velocity.
A positive leasing market with strong global occupier demand has sustained investors’ interest in the commercial real estate sector.Warehousing and industrial is expected to pick up following the granting of infrastructure status to the logistics sector.