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India Realty Looking Better than China


India's housing sector is likely to fare better than China's, as investors are upbeat on India, said the global head of an international real estate consultancy firm. During recent meetings with investors we got this feeling that as of now they are more comfortable investing in India than in China said Patrick Ramsay, global head, residential real estate, Knight Frank.

Residential real estate prices in China and India are increasing, especially in cities such as Beijing, Shanghai, Mumbai and the National Capital Region (NCR). There are also indications of a price bubble in these cities.

"If you compare India with China, the group of high net worth individuals (HNIs) is smaller in the latter. HNIs invest as much as 40 per cent of their wealth in residential real estate according to our research," said Ramsay.

However, prices will not increase but will not reduce substantially also in the short run, Ramsay said. There is a demand-supply gap that prevails in India, which according to industry experts is the main reason for the price rise in the last one year. On an average, prices have gone up by 30-50 per cent in Mumbai and NCR.

Similar reasons are being considered for increase in realty prices in Beijing, though things are different in China.

Unlike India, there is an entry restriction (for people from outside city) in Beijing and an embargo on who can buy property in the city. On February 16, the government announced that homebuyers would be subjected to restrictions and officials are talking about making hukou -- the domicile certificate that is needed to buy property -- even more difficult, The Economist said in a recent issue.

Despite this, there is still a huge demand for residential properties with fears of a property bubble lurking. When asked whether a bubble is developing in Beijing and Mumbai, Ramsay said, "The high-quality developments in Mumbai and Beijing are limited and the demand is still there. On the other hand, if funding slows down (as reports suggest) it will only slow down the supply."

Traditionally, the number of transactions in residential real estate is more in bigger cities in India when compared to China. The prices of residential properties in most expensive areas in India are higher than similar areas in China.

Source: Feb 25th 2011, Hindustan Times