Diaspora gives wings to India luxury housing boom

ICRA

12/09/2024 04:25

(The author is a Reuters Breakingviews columnist. The opinions
expressed are her own.)
    By Ujjaini  Dutta
       BENGALURU, Sept 12 (Reuters Breakingviews) - India’s
diaspora is fuelling a property boom in the world's
fifth-largest economy. New launches of luxury homes by saleable
area in the top seven cities hit 231 million square feet in the
year through March, up 48% year-on-year, according to ICRA
 ICRA.NS , a credit ratings agency. Average prices of luxury
homes in places including New Delhi, Bengaluru, and Chennai
jumped 18% in the three months to end June. It's a helpful
tailwind for GDP growth.
    After a decade-long slump in the housing market through
2019, real estate is hotting up again as an investment choice
including for ultra-high net worth individuals. Since the
pandemic, consumers also prefer bigger homes. Plus landmark
regulation introduced by Prime Minister Narendra Modi's
government calls for timely project delivery and is restoring
the confidence of everyday buyers.
    Non-resident Indians are emerging as an especially strong
source of demand; they will be the source of 20% of overall
primary sales by 2025, up from 10% in 2019, according to
NoBroker. The appetite of these buyers looks robust: they have a
strong emotional connection to their motherland and plan to use
the properties in the future, notes the technology-led real
estate services firm.
    The frenzy has put stocks of top developers in India into
overdrive. Shares of $24 billion DLF  DLF.NS , the largest
listed real estate company in India, soared 57% in the past one
year and those of Macrotech Developers  MACE.NS  - part of the
Lodha group – jumped 53%. Over that period, the Nifty Realty
Index  .NIFTYREAL  has outperformed the broader Nifty 50
benchmark  .NSEI  by 47 percentage points. By contrast, new
launches of affordable property are stagnating as overall
consumption in the economy remains subdued. 
    The luxury boom, and non-resident Indian purchases, matter
because property is an important source of overall investment -
which accounts for about a third of GDP. Private real estate
demand, including for dwellings, was leading the uptick in
investment, more than public capital expenditure, HSBC economist
Pranjul Bhandari pointed out in a research note in March. 
    India’s blistering economic expansion is starting to
moderate; GDP growth slowed to 6.7% in the April to June
quarter. Demand for luxury housing is easing to a less frothy
pace too: new launches will rise about 27% year-on-year in the
current financial year, per ICRA. Overseas Indians will remain
important buyers, however. They send remittances to the country
and answer official calls to purchase disapora bonds, issued by
the government at times of crisis. Now they are flattering
investment too.
    Follow @ujjainidutta_
      
     CONTEXT NEWS
     New launches of luxury homes in India by saleable area hit
231 million square feet, up 48% year-on-year in financial year
2024, according to ICRA, a ratings agency majority-owned by
Moody's.

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Graphic: India's diaspora is snapping up property back home    https://reut.rs/3Ba4Jdz
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 (Editing by Una Galani and Aditya Srivastav)
 ((For previous columns by the author, Reuters customers can
click on  DUTTA/ 
ujjaini.dutta@thomsonreuters.com))