Interview with Anuj Puri - Chairman & Country Head, Jones Lang LaSalle Meghraj Property Consultants
1) Which segment of housing is drawing the maximum attention of investors at the moment?
The current investor focus is on premium properties that are being offered at discounts, as well as on affordable housing projects at not-too-distant locations. However, investors in all types of housing are aware that there are no short-term gains to be had in any. Therefore, the class of investors has also changed from 'quick buck' hunters to serious portfolio players.
2) What is the current ROI on residential Real Estate Investments?
Much depends on the exact type and location of the property, so no uniformly applicable figures are really applicable.
However, in general terms, the least is in premium housing, where the current ROI does not exceed 2-2.5%. It is slightly higher at 4-5% in affordable housing, since there are ready buyers in this class.
3) Has the NRI investment in India seen any change in comparison to 2008? Where do you see it moving towards?
The promise of a correction in key metros and Tier II cities has revived NRI interest in the residential market. We expect a number of scheduled transaction to happen by the end of the first quarter of 2009. However, NRIs will stay away from unfamiliar, historically over-speculative Tier II/III cities and focus more on markets that they understand and know to have investment potential. NRIs tend to invest in income-generating assets, with an emphasis on commercial spaces, and their preferences in this regard are undergoing a marked sea-change.
Up until recently, they would invest in projects that promised satisfactory ROI – now, they prefer to pick up only existing, fully-leased assets by reputed developers. These would primarily include projects by developers who were intending launch IPOs and now need to unlock capital to fund new ventures. Also, NRIs will tend to steer clear of investments in retail projects.
4) In the current scenario, how feasible is it for an investor to buy a home?
Extremely feasible, if he has his eyes on significant profits in the long term. The next few months will be an excellent time to pick up properties at rationalized rates in reasonable anticipation of decent returns over a 4-5 year term.
5) Would you call the current market a buyers or a sellers market? Please elaborate?
It is now definitely a buyer's market, though many developers have failed to realize this and act accordingly.
6) The need for affordable housing has been made loud and clear. How do you see this sector growing in 2009?
Many players such as Unitech, Rustomjee, Omaxe and Lodha have announced their intentions to launch affordable housing projects. The fact that major names are getting involved in this segment is extremely significant. By how much the segment will grow depends on how many of these projects actually see the light of day.
7) The Central Government has called in a meeting with states later this month to encourage state governments to release land for low income and middle income housing schemes. Your take on this. How feasible do you think this is in the current scenario?
Not as much as may seem at first glance. Developers still need the requisite funds to build. As of now, nobody is buying land and quite a few developers are trying to offload their holdings.
The Government would have to go a step further and cerate special lending provisions for such players in order to make this a significant step forward for affordable housing