Cash Flows In & Out Of Indian Real Estate In Record Amounts
Is it time for foreign investors to give it a second look?
In the chart of international countries investing in US real estate, there is a surprising contender for a place on the podium—India. Predictably, buyers from China, Hong Kong and Taiwan topped the table for 2015 with $28.6 billion in sales, reported CNBC. Canada ranked second, with $11.2 billion, followed by India with $7.9 billion. For India’s buyers, spurred on by their stake in Silicon Valley, the west is best. They mainly gravitated to homes in Los Angeles, San Francisco and Seattle. New York also featured highly because of areas like Queens where there is a heavy Indian population.
For many years London was the first choice to invest Indian rupees because of its long established Indian community. Now, with the advent of Brexit and the decline in the value of the pound, that looks set to increase.
The big draw for Chinese and Indian investors to buy US real estate is health, according the Sotheby’s Luxury Real Estate broker Kevin Brown.
“There was a survey done in New Delhi recently and a question came up, ‘Why are you investing in US real estate?’ The number one reason was health. You go to Bejing, New Delhi, you cannot breathe, you cannot see the sun,” he says. “The Chinese and Indians work so hard for their money. Now all of sudden they’ll have health issues by the time they’re thirty. The second reason was transparency. I compare it to going on a plane and the person next to you paid a different price for their seat than you did. There’s no rhyme or reason for the price and everyone seems to get a different number for the same property. The third reason would be for schooling. We have a great education system and foreign buyers want their children to benefit from that.”
Despite smoggy skies and shady agents, many Indians without funds already allocated overseas, may have a hard time investing in the type of luxury real estate that Brown sells. The Indian government limits overseas investment to $250,000 per year. Additionally, there’s been something of Wall Street investment frenzy going on in India over the last couple of years.
During a few manic months in the spring and summer of 2015 global giants including Goldman Sachs, Warburg Pincus and Blackstone invested over Rs6,000 crore ($910 million) in Indian real estate firms, according to qz.com. Then, earlier this year Dutch pension fund manager, APG Asset Management NV, which handles $450 billion in assets portioned off $275 million and allocated it to Indian real estate with local developer Godrej Properties Ltd., managing the funds. The money will be used to build residential properties in major Indian cities said Pirojsha Godrej, managing director of Godrect Properties told the Wall St Journal.
For years wealthy foreign investors, mainly of Indian ancestry, were skittish about buying second homes in India. The fear of squatters and a court system which would have made Tony Soprano blush, made it hard to avoid losing money. With large amounts of capital now flowing from west to east, clearing huge swathes of land for new developments, it remains to be seen if it will also cleanse Indian’s rampant corruption associated with residential real estate.
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