Indian demand for residential plots, affordable homes rises

Most realty experts believe that unlike conventional market trends, residential plots have emerged as the most preferred property types.

A good crowd was on hand at the Indian Property Show at the Dubai World Trade Centre on Friday. The event concludes today. Photo by Shihab

Dubai: Rising demand for residential plots and a growing property resale market are among some current trends in the Indian realty sector even as affordable housing buzzword gains increased focus, realty experts said.

“Buying plots rather than built-up property is gaining traction — in fact, the demand for plots is about 10 per cent higher than for apartments,” said Ashwinder Raj Singh, chief executive officer of residential services at JLL India.

Speaking at the Indian Property show underway at the Dubai International Conference and Exhibition Centre, Singh explained that one of the main reasons for this trend is that the concept of smart cities is gaining ground. “Buyers in various cities around which smart cities are being planned feel that a plot of land will get better returns than apartments.’

The three-day property expo, inaugurated on Thursday by Dubai Chamber of Commerce and Industry Chairman Majid Saif Al Ghurair, has lined up more than 150 developers and property experts.

Most realty experts believe that unlike conventional market trends, residential plots have emerged as the most preferred property types. In a recent survey, it was found that  about 48 per cent respondents voting for it. “While plots do score better over other property-types for better returns, this remarkable trend also indicates that buyers are now investing with mid-to-long term investment horizon,” said the survey report.

Property experts argue that 2015 would a better year for the realty sector for three key reasons:  the prospects of borrowing cost going down with inflation under control; economic growth accelerating with India ranked by the World Bank as the faster-growing big economy at 7.5 per cent growth; and a game-changing market re-orientation with developers now largely focusing on affordable homes.

Thanks to several major initiatives that significantly impacted the realty sector, including incentives for infrastructure financing by the Reserve Bank of India; lowering of interest rates on home loans; framework for real estate investment trusts, or Reits, and relaxation of FDI norms in the construction sector; and the Real Estate Regulatory Bill, the prospects for all stakeholders appear brighter, exhibitors at the show said.

“With real estate remaining the de facto investment option of choice for most Indians, it is important to understand what factors are driving the realty market. The governing dynamics change according to economic conditions, policy changes and other factors, so what was true of the market two years ago may no longer work today,” Singh said.

The long-awaited Reits, which will act as the investment vehicle between investors and developers, commercial real estate is expected get a shot in the arm. Experts argue that Reits are a safe investment vehicle given the fact that it  will only invest in the properties which are completed and income generating.  “This is a major advantage for investors as they do not face any risks regarding the completion or success of the project.”

Equally significant is a government move to allow 100 per cent foreign direct investment in construction becoming a reality. With no three-year lock-in period, the new rule removes a major hurdle for the overseas investors who can now exit once the project is completed. “More global conglomerates are looking to invest in the Indian sector, which assures good returns over the mid-to-long term because of the huge potential in the country driven by the housing needs of millions,” said Singh.

He said India is witnessing a rising market trend for resale properties, and Bengaluru tops the list of the cities with availability of as much as almost 60 per cent of the country’s secondary sales properties. “Bengaluru is followed by Pune at 36 per cent and Chennai with 31 per cent.”  

Research indicates that Pune is the second most preferred market for UAE-based NRI investors today; Pune is the second most preferred market, according to a research. “The market in Pune is both progressive. It is a great time to invest in commercial real estate with double the return on investment  compared to residential investments,” said Solitaire World. Singh said another trend is that demand for larger homes outweighs that of small homes. “The prediction at the beginning of the year was that smaller property sizes will rule the roost, but the opposite has actually happened. In the first quarter of the year, the demand for bigger homes of 3BHK and more has increased by three to 10 per cent across different cities,” he said.

Even though affordable and mid-income homes are the investment buzzword, the luxury homes segment is once again growing in double digits, too. “With more and more Indians joining the millionaire club, the appetite for homes that offer a luxurious lifestyle is increasing. For NRIs as well upper middle-class buyers from Tier I as well as Tier II cities, luxury homes are the default choice,” said Singh.

Meanwhile, a study by Sumansa Exhibitions, the organiser of the Indian Property Show, showed that 65 per cent of visitors at the event were looking for financing. Furthermore, visitors in the 40-to-50-year-old age bracket had the highest weighting with 25 per cent.

issacjohn@khaleejtimes.com