Bangalore has retained its tenth rank among the most favoured real estate investment destinations in the Asia Pacific region. A study on emerging real estate trends in the region by PricewaterhouseCoopers (PwC) and Urban Land Institute had ranked the city tenth last year also.

Bangalore’s organic, growth-driven market and ability to buck mega trends has helped it retain its credentials as a stable play and maintain its position on the list, the report said.

The survey is based on the views of over 360 internationally known real estate professionals, including investors, developers, property company representatives, lenders, brokers and consultants.
Mumbai, Delhi slip

Rising economic and inflationary pressures saw Mumbai and New Delhi fall from third and fifth place in last year’s list for investment opportunities to 15th and 12th position respectively in 2012.

Vacancy rates in Mumbai are likely to remain stable through the close of 2011 and into 2012. Absorption will be positive next year, but rental values remain questionable as economic and inflationary issues continue to linger.

In New Delhi, inflation has continued to spike costs, and it may not be economically feasible to build there. Ongoing funding problems do provide investment opportunities for private equity investors, the researchers said.
LATENT DEMAND

On the current scenario in India, Mr Jai Mavani, Leader – Infrastructure and Real Estate, PwC India, said, “In the medium term there is a secular steady state trend given India’s favourable demographies. Even post 2009, when the real estate markets were bottoming out in India, there were bursts of demand at every price correction. This clearly demonstrates latent demand. However short-term pain is here to stay until the regulatory processes get streamlined, approvals resume, interest rates improve and more liquidity gets introduced.”

However, the long-term solution can only come through reforms – both regulatory and financial. The real estate regulation Bill is a step in the right direction although the content needs some tweaking to prevent over regulation.

Further, it is time for the Real Estate Investment Trust (REIT) regulation. Only then long term retail money can flow in and enable circulation of capital. Besides Pension funds and insurance companies (as it is done globally) should also be allowed to invest in long term income yielding assets with quality tenants, he said.
ATTRACTIVE OPTION

With the market expecting to bottom out sometime in the last quarter of this fiscal, debt funding drying up and recession expected to cut inflationary pressures on commodities, it will translate into attractive investment option for private equity players looking to get India back on their agenda.

With sales volumes stagnant and rising labour and commodity prices also squeezing finances, developers also are now expected to turn to private equity funds as a last resort. Incoming capital is expected to rise in the following year. If it does, it will represent a significant turnaround for a market that foreign private equity investors have largely shunned since the onset of the global financial crisis.