The case for investing in Indian property
India being named as one of the world’s fastest-growing economies is nothing new. In the wake of the global recession, it was earmarked with China as an emerging market where good returns on your investments were still possible. But last year, while China’s stock market dipped, India held on, and ended 2015 with its economy expanding at 7.3 percent, compared to China’s 6.8 percent.
Why is India so strong? Experts point to a number of reasons. One is its supportive government, which invests in start-ups, encourages transparency in its banks and has organised initiatives such as Make in India (makeinindia.com) to attract foreign manufacturers. There are 200 million people within the country’s 1.2 billion population now considered middle class, with only six percent over the age of 65, according to World Bank. India is even said to have benefited from the recent oil price correction, resulting in lower manufacturing costs and inflation, which continue to boost employment opportunities and levels of disposable income.
This is despite the country’s high levels of poverty remaining evident. While it might be encouraging to read about India’s success, the percentage of its population coping with poor living conditions and a lack of food ranges from 20 percent to 50 percent, depending on which government survey you read. There are arguments that the current growth is helping to reduce poverty, but some economists believe that only the middle class are benefiting while the poor are left further behind.
Further work here will be needed, but in the meantime its workers are spending more and developing expensive tastes. Assocham, one of the apex trade associations in India, estimates that the country’s luxury goods market will be worth $18.3 billion by the end of 2016, increasing by 25 percent annually. “The factors that have fuelled the industry’s growth are rising disposable incomes, brand awareness among the youth and purchasing power of the upper class in Tier II and III cities in India,” DS Rawat, Assocham’s general secretary, confirmed to the Times of India.
So, as an outsider who’s not a stock market investor, how do you take advantage? One way might be with real estate, which is another area seemingly on the up. DLF, for example, is one of the country’s oldest property developers, and has recently increased its focus on high-end projects, reflecting the growing economy and tempting overseas investors. “We’ve created DLF5, which is a state-of-the-art, luxury development in Gurgaon, not far from New Delhi,” reveals Aakash Ohri, the company’s executive director. “It’s a gated community, made up of different sections, with apartments, penthouses and landscaped gardens. We’ve had a fabulous response so far in our overseas sales outreach programmes, attracting investors from places like Dubai and Kuwait.”
The features include a golf resort, with residences overlooking the fairways and courses designed by Gary Player and Arnold Palmer. There are fine-dining restaurants and even a private cinema, and such developments appear to be on the rise here. “The demand for luxury goods in India is likely to remain strong for the foreseeable future, and housing is no exception,” Ohri continues. “That’s why developers are launching projects with world-class designs and amenities.”
DLF is simply addressing a new potential market, which is exactly what companies like Apple and Samsung are doing. Both have identified India as a country with massive growth potential, due to its population now being able to afford smartphones. Sales of the devices have expanded 26 percent in 2016 alone (according to Gartner Inc, a US technology research and advisory firm), but with only 220 million people out of a population of 1.2 billion (just over 18 percent) possessing them, there is still a way to go.
Despite the positives, is there still a risk? Investors thought China’s economy was bulletproof until last summer, when the ‘Black Friday’ market crash sent shockwaves across the globe. While there is no evidence to support an issue with India just yet, experts have outlined reasons for why it might be a safer bet than China. “Question marks linger over the long-term ability of Chinese companies to deliver sustainable profits to investors,” portfolio manager Austin Foley of the JPMorgan Emerging Markets investment trust told Money Observer magazine. “Chinese companies tend to be subject to greater government involvement, making us more inclined to question their duration potential.”
For Aakash Ohri, the signs are looking good. “India’s economic growth will have a positive effect on our real estate market,” he concludes. “Combined with changing attitudes towards doing business with India and technological advances, 2016 looks like a year for solid growth. We expect that sales will vastly increase, as India’s strong economic position will look more attractive to investors.”