The Indian Property Investment Market

Past, Present & Future

The huge population of India coupled with the large percentage of poverty in the nation, lead to housing regulations including rent control and strong pro-tenant laws. The extreme gap between the rich and poor of the nation only began to close in the mid 90s, with reforms enabling the growth of the nation.

Strong restrictions against foreign investments kept the nation’s real estate market at a relative stand still for many years, until the development of economic growth started to make an impact. Education and health reforms, along with a booming IT industry assisted with closing the economic gaps in Indian society.

The real estate market grew rapidly in the mid 90s, as incomes grew by almost 100% and a new middle class began to emerge. The sudden growth of the real estate sector came to a sudden halt, as the supply exceeded demand. The issues were rectified by developments in the mortgage market, enabling lending to a greater sector of the market.

With a new middle class society consisting of around 400 million residents, demand became apparent and prices once again started to rise. Non-resident Indian nationals repatriating funds back into the country, accounting for the largest group of the worldwide sector, began investing in properties within the country. As the finances earned within India are not able to be taken out, the returns on investments enabled family members to benefit from a new internal source of income.

Property in Mumbai has now reached one of the world’s highest costs per metre square, in line with major worldwide cities. The rent controls still in place have created housing shortages, increasing capital potential creating a unique seller’s market. Other areas of India such as Bangalore without rent control enable incredible yield returns of around 10% per annum.

The expanding population of India, coupled with the economic growth, increasing middle class society and strong demand for property ensure a continued success of the real estate market. Reforms relating to foreign restrictions, rental controls and repatriation of earnings within India will enable an incredible market potential with strong interests to enter the market from investors worldwide.

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