News: 'Stronger Indian capital market needed for realty funding'
(TNN 12/05/2006) Mumbai - India needs a stronger capital market base for property financing, according to a report by the global research arm of Deutsche Bank.
The report has also called for liberalising foreign investment in the sector to improve the know-how and increase transparency.
For the real estate industry, three aspects are most particularly important, it said. First, further opening to foreign investment is desirable.
Not only do international investors have the means to finance new construction projects, but also possess the expertise in market analysis, facility management and building construction.
In the medium-term, they will act as catalysts to bring greater transparency to the market. Second is the development of the capital market.
According to the report, the debate on the potential introduction of real estate investment trusts (REITs) and real estate funds point in the right direction.
The introduction of REITs in ’07 will give international investors, in particular, a familiar investment vehicle. Private investors could also enter into indirect investment in real estate.
Although interest in new products is most likely to come primarily from institutional investors, the rising middle class is likely to seek new instruments aside from direct property investments in the medium-term.
Besides, the government needs to step up developing the urban infrastructure. The report has also pointed to the latest Budget speech of February 28, ’06, where the finance minister has indicated its intention to promote the establishment of new towns.
But it requires additional funding and is likely, at the best, to make an impact on the real estate market in the medium-term, the report noted.
Deutsche Bank has, however, warned that property investments in India are not risk-free. Market transparency is far behind European or US standards.
It is, therefore, vital for foreign investors to have a professional local partner. The lack of liquidity and upward pressure of pricing remain the main concern within the market. According to the report, India’s real estate sector has strong growth potential across all segments.
The report cites a strong population growth, a large pool of qualified workers, greater integration with the world economy and increasing domestic and foreign investment as factors contributing to fuelling demand for office, retail and residential property.
Deutsche Bank has said that this demand growth will happen across many special property classes as well, such as hotels or second homes. Going forward, it will be a matter of exploiting this potential.
The report has also called for liberalising foreign investment in the sector to improve the know-how and increase transparency.
For the real estate industry, three aspects are most particularly important, it said. First, further opening to foreign investment is desirable.
Not only do international investors have the means to finance new construction projects, but also possess the expertise in market analysis, facility management and building construction.
In the medium-term, they will act as catalysts to bring greater transparency to the market. Second is the development of the capital market.
According to the report, the debate on the potential introduction of real estate investment trusts (REITs) and real estate funds point in the right direction.
The introduction of REITs in ’07 will give international investors, in particular, a familiar investment vehicle. Private investors could also enter into indirect investment in real estate.
Although interest in new products is most likely to come primarily from institutional investors, the rising middle class is likely to seek new instruments aside from direct property investments in the medium-term.
Besides, the government needs to step up developing the urban infrastructure. The report has also pointed to the latest Budget speech of February 28, ’06, where the finance minister has indicated its intention to promote the establishment of new towns.
But it requires additional funding and is likely, at the best, to make an impact on the real estate market in the medium-term, the report noted.
Deutsche Bank has, however, warned that property investments in India are not risk-free. Market transparency is far behind European or US standards.
It is, therefore, vital for foreign investors to have a professional local partner. The lack of liquidity and upward pressure of pricing remain the main concern within the market. According to the report, India’s real estate sector has strong growth potential across all segments.
The report cites a strong population growth, a large pool of qualified workers, greater integration with the world economy and increasing domestic and foreign investment as factors contributing to fuelling demand for office, retail and residential property.
Deutsche Bank has said that this demand growth will happen across many special property classes as well, such as hotels or second homes. Going forward, it will be a matter of exploiting this potential.
posted by InCar Group Press Room at 12:40
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