“And so to Bengaluru…”
Bengaluru as Bangalore has now become known, is the latest city from Knight Frank’s platform for me to visit. Bangalore changed its name in around 2006 respectful of local influence, to Bengaluru, the city’s name in the local Kannada language. My only previous visit to India was Mumbai earlier this year – that certainly gave me a flavour in every sense of the word.
Two hectic days were planned to meet our team in the Bengaluru office, catch up with our business leaders from the regions and service lines, get an update on the ever changing real estate market, attend a Knight Frank client event and a Board meeting. So a lot to cover, but without flinching everyone went to work like clockwork, whilst on the face of it chaos rules (certainly at the airport!) it is clear there is an undoubted underlying efficiency.
In India, led by our new CEO Shishir Baijal, we have seven offices, approaching 900 people and service lines focusing on the core residential and commercial activities. Modest given the vast scale of the country but this only emphasises the great scope we have to build the business in a market emerging with such conviction. India’s growth, especially over the last decade, has been much publicised but it is clear the economy is now (relatively) under strain and in the six or so months since my last visit much has altered. GDP has slumped from levels of 10% to 5% (a 10 year low) with some expecting further declines.
The fiscal deficit is concerning some may say alarming, inflation is on the rise especially for food. Real estate activity is declining, not least since there are severe restrictions on capital flows and the currency has lost 25% of its value over the course of the year.
Yet despite all this the man on the street’s fascination for gold continues with Indian’s spending an extraordinary $53billion on gold! Whilst it has been reported that the number of millionaires is expected to increase by 60% by 2018 according to Credit Suisse Research Institute this is against a backdrop of 94% of India’s population having a wealth of less than $10,000!
So what for real estate? Well the messages are mixed. The housing boom continues with over 1 million homes in the development process within the three core conurbations of NCR (National Capital Region) which includes New Delhi, Bengaluru and Mumbai, with annual sales still approaching 200,000.
Occupier demand is holding up well too. The developers I met spoke positively about take up with a number of factors assisting confidence, a well-educated, English speaking, competitively priced, IT savvy labour force. International standard premises. A global technology boom within which India, and especially Bengaluru has firmly established its place. A weakening currency assisting corporates maintain a competitive position and a “can do” attitude.
The investment market is much more of a challenge. Transparency is not what it needs to be yet. Infrastructure is, to be generous, in need of substantial investment and the market remains mainly a local one. I have no doubt however, that the market will open up again and once growth and confidence have been re-established I am sure we will see things change, all markets need foreign investment and knowledge. India and real estate are no exception. In the meantime the growing wealth in India will mean resident and non-resident Indians are a powerful force and one we intend to capture.
As an example, this year alone Dubai’s recovery has seen house prices increasing by 25% with non-resident Indians being the most active contributors. Whilst the current restraints on foreign investment are significant there is an expectation that real estate investment will be liberalised and grow momentum which means that Real Estate Investment Trusts will become part of the property landscape and suggests the beginning of a period of change. In the short term there is still much to sort out.
Over leveraged property resulting in over committed banks subsequent to the massive growth of the preceding 10 years. This is now coming into sharper focus and I hear the banks are beginning to flex their muscles.
Never have I been anywhere that despite relative economic turmoil with currency, politics and GDP etc, spirits are high and the balanced confidence is infectious. The real estate industry is, in any modern sense still in its infancy, but in the short period to date it has achieved huge amounts. We have used this time to stabalise our platform, recruit new enormously talented people to each key service line and now hopefully, just like the local economy we will use our international depth, breadth and influence to out perform.”
