Indian cities slipped further in the regional rankings this year, but did manage to retain a position in the top 25 real estate destinations of the Asia Pacific region. Delhi has maintained its ranking at 21st position while Chennai has made an entry for the first time at 22nd position while Mumbai and Bangalore slipped to the 23rd and 20th positions respectively in the list of investment destinations covered by the Emerging Trends in Real Estate Asia Pacific 2014, published jointly by the Urban Land Institute (ULI) and PricewaterhouseCoopers (PwC).
In the previous report of 2013, Mumbai and Bangalore were placed at 20th and 19th position respectively. These low ratings are attributed to the ongoing economic problems, an uncertain currency outlook following a mid-year plunge in the value of the rupee, and an investment environment widely perceived to be unfriendly to international investors. Still, interest in Indian markets remains high. With national elections looming and reports on the ground suggesting that the tide may be turning in receptivity to foreign investment, many foreign funds are waiting on the sidelines to see what happens, the report states.
Gautam Mehra, executive director at PwC India said the general slippage of Indian cities in the rankings, coupled with the retention in the top 25 list, tells a story that on the one hand, there is the negative impact of the combination of market, currency, regulatory and political risk which continues to result in a general sense of nervousness and the tendency of foreign investors to stay on the sidelines, while on the other, the undoubted potential continues to keep interest levels going. The new entrant (Chennai) gives another positive twist to the story.
It felt that a more conducive and transparent environment will set the ball rolling for attracting greater levels of investment, both foreign and domestic. The report stated that overall for Asia, the real estate fundamentals are expected to remain strong in markets in 2014, with stiff competition for conventional assets in prime markets boosting the popularity of niche property sectors and secondary markets for investments.
The report notes that, unlike other asset classes, real estate in Asia “barely flinched” this year in response to the tapering of the U.S. economic stimulus and expectations of higher interest rates. This is due, in part, because of the increase in sovereign wealth and institutional capital being directed to Asian markets, as well as the substantial volume of Asian capital being exported from China, Singapore and South Korea into real estate assets across the region.
The generally positive outlook for many markets throughout the Asia Pacific region is highlighted by the re-emergence of Japan (after a five-year absence from the top rankings) as a favored market for investment and development. The country is one of the largest beneficiaries of capital flows from other regions within Asia, notes the report. Outside of Japan, the survey found continuing interest in assets located in Asia’s emerging markets, including Jakarta and Manila.