India set to overtake China as property investment destination

By Lee Kah Whye |
November 22, 2022 08:36 STI

Singapore, 22nd Nov (ANI): India is poised to overtake China as an attractive property investment destination as China’s property investment valuations decline.
The property price index has been steadily rising in India over the past few years. The All India House Price Index (HPI) released by the Reserve Bank of India (RBI) rose at an annual rate of 3.5% for the quarter ending June (Q1:2022-23), increasing by 1.8% compared to the previous quarter.
In an interview with Nikkei Asia, CLI said it plans to diversify its portfolio and is looking for investment opportunities in Vietnam and India. The aim is to build resilience in areas such as supply chain and energy against the shocks of globalization seen during the COVID-19 pandemic.
CLI, whose major shareholder is Singaporean public investor Temasek Holdings, is one of Asia’s largest real estate investment managers with $90 billion in real estate assets and $63 billion in funds under management.
“We would like to do more in Vietnam, we are already very active in India,” chief financial officer Andrew Lim told Nikkei. “What recent events have taught us is that it is probably dangerous to put all your eggs in one basket…at a time when globalization is increasingly being tested.
Lim believes Vietnam in the post-COVID era will emerge as an important destination for capital, especially when it comes to manufacturing. While India has huge solar resources. “These are markets if you’re looking for energy redundancy, energy resilience, renewable energy sources, suddenly it becomes important from that perspective.”
Meanwhile, all is not well in the Chinese real estate market.
Last week, the Chinese government released data showing new home prices fell at their fastest pace in more than seven years, while property sales measured by floor area fell for a 15th consecutive month in october.
Based on data from the National Bureau of Statistics of China, for the cumulative period to October, investment in real estate development fell 8.8% from the same period a year earlier, the area commercial sold fell 22.3%. , while income from commercial properties sold fell 26.1%.
As China now takes steps to revive its real estate sector, real estate investment firms like Singapore’s CapitaLand Investment (CLI), which owns a third of its assets in China, are looking to diversify their portfolios. Vietnam and India were cited by CLI as possible destinations for future investment.
With the property sector accounting for around a quarter of China’s $17 trillion economy, concerned Chinese authorities have introduced measures in recent months to restore confidence in the collapsing sector. Earlier in November, in the most comprehensive bailout for the sector since it was hit by a debt crisis last year, regulators unveiled 16 support measures aimed primarily at boosting liquidity in developers.
Key measures include allowing banks to provide maturing loans to developers, supporting property sales by reducing down payments and lowering mortgage rates, boosting other funding channels such as bond issues, obligations and to guarantee the delivery of pre-sold homes to buyers.
Some analysts say the support measures are the strongest signal yet that the two-year crackdown on the housing sector is over.
UBS’s chief China economist, Tao Wang, told CNN the package was a “turning point” for China’s real estate sector. Along with other policies announced earlier this year, she estimates it could pump more than 1 trillion yuan ($142 billion) into real estate.
The Chinese government began trying to rein in developers’ excessive borrowing to control soaring property prices in August 2020. The move disrupted the property market as the country’s second-largest developer, Evergrande, defaulted on its debt. As the real estate sector collapsed, several large corporations sought protection from their creditors. Lack of cash has caused work to be delayed or suspended on many pre-sold housing projects across the country.
China’s property sector has been hit hard as developers swing from crisis to crisis and halt construction of apartments as they run out of money. Real estate prices and transactions are falling. Besides growing developer debt, China’s strict COVID policies amid rising coronavirus cases have impacted manufacturing and consumer spending.
The crisis deepened in the middle of this year when angry homebuyers refused to pay mortgages on unfinished homes, sparking fears of contagion and spooking financial markets. Since then, the authorities have tried to defuse the crisis by urging banks to increase loan support for developers so that they can carry out their projects. Regulators have also cut interest rates in a bid to restore buyer confidence.
According to data from China’s National Bureau of Statistics, average new home prices in China’s 70 major cities fell 1.6% year-on-year in October 2022, after falling 1.5% a month earlier. early. It was the sixth consecutive month of falling new home prices, the fastest pace in the streak and the fastest fall since August 2015.
Sales at the top 100 property developers fell 26.5% from a year ago in October, according to a private survey by China Index Academy, a real estate research firm. So far this year, their sales have dropped 43%.
While welcoming the government’s housing support measures, analysts remained cautious about its impact on buyer confidence.
“The housing market has yet to show signs of recovery,” Nomura analysts said in a research report last week, adding that the latest measures may have “little direct impact” on boosting buying. homes, adding that the zero-COVID strategy will weigh on the sector.
Although the measures are believed to support the property market, bankers and analysts say they only address supply issues in the property market, with the recovery in demand remaining a major concern. Many people are still hesitant to upgrade their homes or buy new ones due to economic uncertainty and declining employment.
Despite the current pessimism, one company confident in the long-term future of the Chinese real estate market is CapitaLand Investment (CLI) of Singapore. It currently owns about a third of its overall real estate portfolio, which is primarily comprised of non-residential commercial real estate, in China. (ANI)