Country Guides Country Guide: India

Date Published:

18/11/2009

For most Westerners India is the land of Bollywood, the Taj Mahal and Goa. But is it somewhere to buy a home, too?

By Gordon Miller

Bollywood has emerged over the last decade as the eastern Hollywood and is home to extravagant musicals, exotic costumes and casts of thousands of dancers. The Taj Mahal, a spectacular mausoleum, is one of the seven modern wonders of the world. It’s a must-visit on any tour to the sub-continent. Goa is beach central for backpackers, budget tourists and latter day hippies, looking for a cheap hang out with an Indian flavour. But India is so much more than those ‘landmarks’.

Its 'Tier I' cities of Mumbai, Bangalore (Indian Silicon Valley) and Delhi are amongst the fastest developing in the world. It is predicted that 12 million homes are needed in 400 new townships to cater for the burgeoning local population, moving to the cities to take advantage of better job opportunities in IT and other high tech industries.

Yet despite the pent up demand for property, GlobalPropertyGuide.com reports house prices in big Indian cities continued to fall during the first quarter of 2009, having begun to slide in 2008. ‘In an April 2009 survey, a resounding 99 per cent of residential property brokers in Delhi, Mumbai, Bangalore and Chennai agreed that prices had dropped in Q1 2009, up from 78 per cent reporting price falls in Q4 2008, according to Edelweiss. Price falls of as much as 30 per cent in Q4 2008 from the previous quarter were reported by Jones Lang LaSalle (JLL).’

Why did this happen? While house prices rose rapidly from 2002 to 2007 in city centres, a housing bubble was encouraged by inadequate infrastructure, lack of planning and antiquated land use laws. The upshot is a burst bubble.

But if domestic demand has weakened, foreign investment is reported to be on the increase. A survey conducted by the Association of Foreign Investors in Real Estate (AFIRE) found that India figures in the top three property markets, offering the best opportunity for capital appreciation after the United States and China.

What the future holds is unclear, but analysts are downbeat. The IMF forecasts 5.4 per cent GDP growth in 2009, down from 7.3 per cent growth in 2008. In February 2009, Edelweiss forecast that the real estate sector would remain depressed over the next four years, and predicted that prices would decline by at least 30 per cent over that period.