Bangalore, Mumbai real estate on global fund managers radar

Singapore India has emerged as a new destination for property investors with Bangalore and Mumbai topping the list of real estate markets for investment and development, according to a report.

“India is on the radar of fund managers for good growth potential. Large institutional investors believe in long-term growth potential,” said John Fitzgerald, chief executive of the Urban Land Institute (ULI).

This years Investment Prospects survey shows a strong shift away from last years favorites, which featured core markets in Japan and Australia. Instead it favours emerging-market destinations, with two Indian cities topping a list which also includes Vietnam, the Philippines and Shenzhen (in China), said the report prepared by ULI along with PriceWaterhouseCoopers (PWC).

Bangalore has emerged first in investment and development for 2017, it said.

“The big story for investors has long been the citys role as Indias main hub for the business process outsourcing (BPO) and IT industries,” said the report.

There is a huge demand for space as both domestic and international companies flock to open both call-in and research-and-development centres, it pointed out.

Mumbai was second in investment, third in development out of the 22 Asian cities.

A major road and rail infrastructure programme in Mumbai will allow easier access to the centre from outlying areas, with most construction scheduled for completion before 2019, said the report, adding that Mumbai was previously considered most expensive and slow growing city in India.

Bangalore and Mumbai also emerged as first and second in Historical Investment Prospect Rankings for 2017, shooting up from 12 and 13 positions in 2016.

New Delhi was ranked 10 in development and 13 in investment for 2017.

The capital city was also ranked 13 under the Historical Investment Prospect Rankings for next year.

Following the removal of various regulatory stumbling blocks, there appears to be real motivation at the central government level to make a deal happen, the report said.

As ever, however, resolving bureaucratic issues in India can be complex and time consuming, it pointed out.

While managers at domestic and foreign investment funds active in India were positive about the prospects for a working REIT (Real Estate Investment Trust) framework to emerge within the foreseeable future ? possibly the next 12 months ? a raft of issues remains to be addressed, it said.

These range from resolving ongoing regulatory disagreements between central and provincial authorities, to overcoming obstacles posed by the standard use of a lease rent discounting model to obtain bank financing, to listing REITs at cap rates that will be appealing for retail investors.

“Again, how long these will take to resolve remains an open question,” said the report. PTI GS UZM