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SunCity enters India


SunCity enters India

Last updated: July 16 2007
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  • SunCity enters India

    DIA will feature prominently in Sunway City Bhd's (SunCity) regional expansion plans as the country offers ample opportunities for developers to partake in the unprecedented growth in the real estate sector.

    Its sheer size and growth prospects make India's property market attractive to many foreign developers

    Its gross domestic product is also expected to grow 8.5% CAGR in the next five years.

    According to SunCity managing director (property development) Ngian Siew Siong, the company plans to focus on tier-two cities where prices have not gone through the roof, and new entrants would be able to make good profit margins.

    “Our preferred cities are Hyderabad, Bangalore and Pune. Hyderabad tops the list as it is currently growing at 30% a year, fuelled by the growth of information technology and biotech industries,” he said.

    Having signed two property joint ventures in Hyderabad, the company is eager to venture into Bangalore and Pune to expand its exposure in the robust residential properties sector.

    In its Indian ventures, Ngian said SunCity would kick off with residential developments to earn a name as a premium residential developer before exploring other areas such as information technology parks and retail properties.

    Grade-A commercial property, with yields of between 9% and 11% a year, is also in short supply in India.

    “With our track record in commercial property assets, we will also look for suitable opportunities to build the SunCity brand in India in the commercial property segment,” he added.

    Ngian said the company hoped to find the right joint venture partners for its Bangalore and Pune ventures within the next one year.

    Bangalore, India's bustling Silicon Valley, and Pune, which is dubbed the Oxford of India and also an emerging information technology hub, both offer strong growth potential in the property development sector.

    SunCity has signed two joint ventures in Hyderabad, India's second Silicon Valley and one of the richest cities in India.

    “India is still a very young country in the property arena and SunCity's expertise in project design, quality and management capability has place us on an advantageous position to make a difference in the country's property landscape,” Ngian said.

    India's growing housing demand will be further fuelled by expectations of a robust economic growth over the next five years.

    The fact that half of the country's population of 1.1 billion people are in the 25-year age group is also an indicator of the huge potential for housing demand there.

    According to a recent research note by CLSA Asia Pacific, India's real estate market, which had been charting strong double-digit growth, was expected to be worth US$90bil by 2015.

    The Indian government's decision to permit 100% foreign direct investment in real estate development under the automatic approval route for large projects and to allow venture funds in real estate has enhanced the competitiveness of the Indian market and fuelled foreign interest.

    As a result, many regional developers, including Keppel Land, Capitaland and Emaar Group, have entered the market via tie-ups with partners in India.

    In 2005, the Government reduced the minimum investment for projects by foreign developers to 25 acres or a minimum built up of 50,000 sq m from 100 acres previously.

    A policy for “special economic zones” (SEZ) is also in place to encourage the private sector to participate in the development of these SEZs.

    The various tax incentives offered to developers have resulted in significant acceleration in applications for SEZ development, which could provide an additional thrust for real estate activity, both residential and commercial.
    Ngian said to make it in India, the challenge was for developers to source for the right piece of land in the right location and was encumbrance-free.
    “The development size in terms of land acreage tends to be smaller because of the lack of quality large parcels of land for development. Most land parcels are under litigation, leading to appreciation in the price of land that is available for development over the past decade.

    “So, we are seeing more high-rise residential developments sprouting up in most cities.”

    Ngian said most non-resident Indians and local buyers prefer international modern designs that conform to vasthu principles (or Indian feng shui) and practical living concepts.

    “With our well established brand and reputation, coupled with the market knowledge and experience of our local partners, we have the right products to offer to our buyers,” he said.

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