India offers investment opportunities

KUALA LUMPUR: With low prices, growing urbanisation, a young population and consistent national GDP growth of 7% to 8% annually over the past few years, India’s property market may offer good investment opportunities for Malaysians, according to a wealth management company marketing Indian properties.

According to Vishal Gupta, managing director of Sumo Global Wealth Management (SGWM), Malaysians tend to look at places such as Australia and the UK when it comes to property investment because the markets there are more stable and the returns have been good in terms of capital appreciation and yields.

However, “the global economic crisis and the persistent euro crisis may dampen the UK market while capital growth opportunities in Australia are quite limited at this point,” added Vishal. Asia, on the other hand, said Vishal, is the growing economic power at the moment and the two key drivers of global growth are India and China.

“The fundamentals are strong for these two countries to achieve financial growth in the next few years,” Vishal said.

SGWM is based in Australia with offices in Malaysia, Singapore, Canada, South Africa and the UK. The company is organising an Indian Property Fair which is being held today and Sunday at Berjaya Times Square Hotel.

According to Vishal, about 50% to 55% of India’s population is below 25 years of age and by 2030 the working age population is expected to reach 270 million. India is also forecast to have 68 cities with over one million population by 2030 as more people move to the cities.

“The changing social structure is causing a huge paradigm shift and urbanisation is putting pressure on cities to build in order to accommodate the growing population,” Vishal said.

Another driver for growth in India is the infrastructure development, which is creating job opportunities and helping raise income levels.

“These are key factors that will ensure the country will do well financially and it will translate into demand for property,” Vishal said.

India also has strong lending support from the banks and it encourages people to invest in properties rather than the more volatile stock market, he added.

“There was no lending till about 20 to 30 years ago. Our lending penetration is still low at about 7% to 8% of our GDP, compared with developed countries which have penetration of over 100%.

“Right now, the cost of construction in India is less that US$30  (RM90) psf, you can’t sustain that rate for long. This means the cost pressure will keep rising and properties will appreciate naturally,” said Vishal.

He put rental yields at around 3% to 3.5%. However, he said because most properties are sold off the plan, the yields will automatically grow as the price appreciates and demand grows when they are completed.

“We look at the micro factors and the areas in India that are key beneficiaries of government spending and policies or change in investment structure. We then identify these pockets and we look at the best developers to work with,” Vishal said.

SGWM has identified three areas with strong investment opportunities — Chennai, Noida which is located about 5km to 7km from Delhi and Ahmedabad in Gurjarat.

Noida is the site of the first Formula One race hosted in India and has become the educational hub of North India, while Ahmedabad is seeing significant investments in the auto and artillery sectors.

“As for Chennai, it is quite undervalued compared with Bangalore where prices have shot up significantly over the past two to three years. There are areas in Chennai that are seeing huge investment in the manufacturing and auto sectors,” Vishal said.

He added that the low price point, high capital flow into the cities and the high commercial activities will lead to stronger demand and capital appreciation. He estimated that prices start from 3,000 rupees (RM182.74) to 10,000 rupees psf for residences located not more than 7km to 8km from the above cities.

Among the developers participating in the property fair in Kuala Lumpur are Godrej Properties, a subsidiary of Godrej Group, and Jaypee Greens, a unit of Jaypee Group. Both companies are public-listed.

Godrej was the first real estate company to obtain ISO certification and is currently developing projects in 12 cities across India with a combined total of 74 million sq ft. Jaypee Greens has completed projects ranging from golf-centric residences to mega townships such as the premium integrated 452-acre (182.9ha) Jaypee Greens in Greater Noida.

This article appeared on the Property page, The Edge Financial Daily, February 10, 2012.

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