India witnessed growth in property investments
India witnessed a growth of 85 percent in property investments in the first nine months of 2017, compared to the same period last year. The deal volume is recorded at USD2.6 billion in the first nine months of 2017 as compared to 1.4 billion last year, says a report titled Of High Growth, Low Real Rates and Black Swans by Colliers International.
Although property investment in India remains modest in relation to the country’s size and importance, this growth in activity may be a sign that India is starting to mature as an investment market.
“The increase in deal volume is a testimony of the fact that India is a maturing market, with high-value creation potential for its investors. Also, it endorses that there is immense growth potential in commercial, industrial and warehousing industry as most of this capital has been employed in these sectors,” says Suresh Castellino, Executive National Director, Capital Markets and Investment Services, Colliers International India.
Looking at the investment markets on country-basis, Japan retained its position at the top of the table of investment in income-producing properties as on year to date September 2017. However, total transactions in Japan fell by 12 percent year-on-year to USD23.3 billion and ranked just above China that registered transactions of USD22.3 billion (down 2 percent YoY).
Australia was ranked 3rd on the list with total transactions dropped by 19 percent to USD15.2 billion. In contrast to the lackluster performance, in the top three markets, fourth-placed Hong Kong saw a 38 percent increase in transactions of USD14.7 billion. South Korea, recorded a 33 percent increase in transactions, while deal volumes in Singapore surged by 83 percent, to USD8.7 billion.
As per Colliers Research, the economic performance of India has been slightly disappointing compared to the rest of Asia. However, in the third quarter of 2017, India recorded a growth of 515 percent in deal volume, to USD1.2 billion, albeit with a very low base for comparison.
The report further highlights that India has higher benchmark interest rates as compared to other countries. Following the cut to the repo rate by Reserve Bank of India, benchmark interest rates have fallen to 6.4 per cent. Most economic forecasters, expect the Reserve Bank of India to keep interest rates unchanged in the coming months, although, few expect further rate cuts. CPI inflation has been under control, reaching 3.3 percent year-on-year in September, however, certain core measures of inflation are significantly higher.
“Various economic forecasts expect CPI inflation to move back above 5 percent in the first half of 2018, and remain constant. If so, then real interest rates should stay below about 1.6 percent over next years, compared to a range of about 3.0-4.3 percent, over the first three quarters of 2017. This loosening of real monetary conditions ought to support capital values in our maturing investment property market,” says Surabhi Arora, Senior Associate Director, Research, Colliers International India.