The Top 3 Cities In The Asia Pacific Region Are Delhi, Mumbai And Bengaluru

Among the 22 Asia Pacific regions, Delhi, Mumbai and Bengaluru have been rated the top 3 investment destinations for real estate.

Investors from other countries have really welcomed the support given by the Indian government to help improve the real estate business across the country.

The real estate Asia Pacific 2018 report duly published by PricewaterhouseCoopers (PwC) and the Urban Land Institute (ULI) clearly states that these 3 cities have been ranked 12,15 and 20 respectively, on the real estate investment list of cities.

Previously, Sydney, Melbourne, Singapore, Shanghai and Ho Chi Minh City were the top investment cities globally. However, the report also stated that the effect of demonetisation and the GST policies have not only created liquidity issues but also impacted investment areas and the other developmental aspects of the country.

Mumbai has ranked 12th on the list of investment destination for 2018. Incidentally, it ranked 2nd in the previous year. In terms of developmental prospects, it now ranks the 8th. Similarly, Bengaluru and New Delhi rank the 15th and 20th positions on the investment ranking list as against 1st and 13th last year.

Mumbai ranked 12th in investment, eighth in development:

Mumbai continues to remain the financial capital of India and has benefited from the strength of India’s capital markets. The retail sector has started attracting investments from foreign countries, according to recent reports. In another scenario, Mumbai’s office vacancy rate continues to remain very high. However, Mumbai lags behind in terms of Grade A stock.

Bengaluru ranked 15th in investment and 16th in development:

The city of Bengaluru is emerging as India’s centre for business process outsourcing (BPO). The city has built its reputation over the years as an IT centre which attracts many foreign companies to set up their offices. Early on, many foreign investors brought income producing assets to this city, in conjunction with the local partners. Some of these assets are up for sale now. Moreover, in the first quarter of 2018, India’s REIT sector is expected to launch its first IPO.

The operators of BPOs in Bengaluru have reported a rental growth of around 8 to 9% annually. The emergence of automation and artificial intelligence will undoubted increase the demand for a lot more workforce than now.

New Delhi ranked 20th in investment list and 18th in development list.

Compared to other major cities in the country, New Delhi seems to have become an unpopular destination for investment. This downfall is mainly due to the hit that the city has taken because of demonetisation and implementation of GST.

Developers in the northern parts of India are often seen as holding large portfolios and tend to be overleveraged. There are many developers that have earned a bad reputation over the years. Additionally, many projects have experienced long delays. However, the city is recovering slowly and steadily and over the years, it is expected to be one of the great investment destinations.

As far as office sector was considered, the city of Delhi was not effective in its effort to grab a share. In the recent past, there has been demand for IT companies but the uptake has been slow. On the other hand, in Mumbai, the rents are higher and vacancies lower for properties in the upscale locations. The stark truth is that India is the only country providing long-term sustainable 3 to 5 percent rental growth profile over a long period. Investors identified India among others as a destination where data centres are projected to provide 13 to 15 percent IRR.

Although the supply of affordable homes has increased in the last 3 quarters, investors still continue to be cautious. One of the reasons is availability of lands at affordable prices. Also, these land parcels are now away from the city. India, according to reports continues to attract institutional and sovereign wealth type capital.

Also, most international investors in India prefer commercial property, with cap rates currently averaging in the range of 8.5 percent to 8.75 percent. Retails assets are becoming popular across the country, with a number of portfolio deals getting successfully closed from time to time. The rentals have gone up between 8 and 10% per annum. Yet, the residential segment continues to suffer because of the effects of demonetisation and policies of GST. It will be a while before things fall in place again. Residential oversupply is another problem which is making foreign investors to get away from investing.

India still remains very bright. There now seems a real prospect that Indian maiden REIT will be listed by the end of the first quarter of 2018.

The Indian logistics sector looks like a gold rush now a days – USD 2.5 billion invested in last six months. Domestic warehousing stock in India currently equivalent to 1.5 percent of what is available in China and cap rates in the area of 9 to 10 percent.

The emerging trend supports a lot the realty business and in the coming days, the business is expected to pick up both in the residential and commercial segments across the country.

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