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Emerging Trends in Real Estate® Asia Pacific 2008.


Emerging Trends in Real Estate® Asia Pacific 2008.

Last updated: November 22 2007
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  • Emerging Trends in Real Estate® Asia Pacific 2008.

    The report, being released at a series of events in Asia over the next several days, provides an outlook on Asia Pacific real estate investment and development trends, real estate finance and capital markets,trends by property sector and metropolitan area, and other real estate issues pertinent to the countries in Asia.

    Twenty markets are included in the report. It is the second Asia Pacific edition of the highly regarded annual Emerging Trends in Real Estate® investor survey, which has covered United States markets for 29 years and European markets for five years.

    Based on the opinions of internationally renowned real estate professionals, Emerging Trends is one of the most respected and anticipated outlooks for the industry.

    The Asia Pacific version reflects interviews with and surveys of more than 190 professionals, including investors, developers, property company representatives, lenders, brokers and consultants.

    ULI Senior Resident Fellow Stephen Blank is presenting the report to Institute members during meetings in Tokyo, Singapore and Hong Kong. According to Blank, one change highlighted in Emerging Trends is the rising number of individuals and firms now active in more than one Asia Pacific market, indicating agrowing comfort level by the business community with operating in several cities offering widely varying conditions.

    “It’s clear that the Asia Pacific property market is still as diverse today as it was a year ago, in terms of opportunities, risks, capital markets, economics, demographics and business cycles,” Blank said. “The fact that more businesses understand and recognize the diversity and variations is undeniably another step toward market maturity.”David Sandison, Tax Partner, PricewaterhouseCoopers in Singapore, acknowledged Blank's observations. "It is expected that even greater amounts of capital will be flooding Asia Pacific real estate markets in 2008.

    The real challenge for investors will lie in finding the right assets against the backdrop of yield compression and scrutiny by regional governments and tax authorities," he added.

    Sentiment was strong among survey participants to either buy or hold all types of properties in Shanghai,Singapore and Tokyo, rather than sell properties, illustrating the cities’ strong popularity with the investment communityShanghai, which topped the list for investment prospects, edged up from its second-place ranking last year.
    Still, despite its characterization as an elite city for the real estate industry, some concern was expressed regarding a growing oversupply of some properties in Shanghai.

    The greatest number of “buy recommendations in Shanghai went to the industrial/distribution sector, 67 percent of the respondents advised buying those properties; while 22 percent advised holding. Less than 11 percent recommended selling industrial/distribution properties properties.

    Sixty percent recommended buying retail space, 31 percent advised holding, and 9 percent, selling. Fiftytwo percent recommended buying office space, 35 percent advised holding, and 13 percent, selling. In the retail market, 45 percent of the participants advised buying; 41 percent, holding; and 13 percent selling.

    In the apartment residential/rental, 48 percent recommended buying; 35 percent, holding; and 17 percent, selling.Singapore received the highest rating of any of the cities included in the report in terms of overall risk.

    Singapore is “certainly one of the markets in the area that provides a very stable legal and tax environment, and property rights that are beyond question.

    And it therefore is certainly one of the markets where many, especially Westerners, are very comfortable,” says one respondent. The strongest sentiment for buying in Singapore was in the apartment residential/rental sector, in which 53 percent of the respondents advised buying; while 34 percent advised holding.

    Less than 13 percent recommended selling apartment residential properties. Nearly 52 percent recommended buying office space, 29 percent advised holding, and 19 percent, selling. More than 48 percent recommended buying hotel space, 38 percent advised holding, and 13 percent, selling. In the retail market, 45 percent of the participants advised buying; 41 percent, holding; and 13 percent, selling.

    In the industrial/distribution sector, more than 44 percent recommended buying; nearly 48 percent, holding; and 14 percent, selling.Like Singapore, Tokyo was cited as presenting very low overall risk as an investment market.

    Characterized by survey respondents as a city with a tight inventory supply and low vacancy rates Tokyo is a market that is starting to draw more institutional money, in addition to the opportunistic funds that have been invested over the past five years, the report says. One interviewee predicts “recovery to continue in the next five years.

    The current strategy is to buy and hold…We also expect continued flow of capital, more REITS (real estate investment trusts) with Japan assets in both the Japan stock market and other markets such as Singapore and Australia.”

    The strongest sentiment for buying in Tokyo was in the office sector, in which 62 percent of the respondents advised buying; while 27 percent advised holding.

    Only 11 percent recommended selling office properties. Fifty-two percent recommended buying industrial/distribution space, 33 percent advised holding, and 15 percent, selling. Fifty percent recommended buying retail space, 40 percent advised holding, and 10 percent, selling.

    In the apartment residential market, 50 percent of the participants advised buying; 36 percent, holding; and 14 percent, selling. In the hotel sector, 46 percent recommended buying; 39 percent, holding; and 15 percent, selling.

    The Asia Pacific cities included in Emerging Trends fall into different categories, based on each market’sinvestment and development prospects, and on respondents’ opinions about buying, holding or sellingspecific property types within each market.

    In the first category are the top five investment cities – in addition to Shanghai, Singapore and Tokyo, this group includes Osaka, in fourth place; and Hong Kong,in fifth. All are listed as cities in which to hold or buy most property types.

    In the second category are the strong development markets: Ho Chi Minh City, in first place, followed by Shanghai, Singapore,Bangalore and Mumbai. Compared to last year, the report notes a stronger correlation in this year’s survey between the prospects leading to a high rating for investment versus a high rating for development.

    For instance, numerous interviewees pointed to the declining imbalance between the supply of and demand for investment properties. As a result, more respondents are investigating development opportunities in top-ranked investment markets, the report says. “Due to the limited number of investment properties available, riskier development projects will continue to be popular,” contends an interviewee.

    In terms of favored property types, the hotel sector is ranked highest in terms of investment prospects in Asia Pacific cities, with demand driven by both business travel and rising tourism. Ho Chi Minh City is listed as the top Asia Pacific city in which to buy hotel space, followed by Bangalore, Shanghai, Mumbai and New Delhi.

    The second favored property type for investment is the office sector, characterized as fiercely competitive. Ho Chi Minh City is again listed as the top market in which to buy such properties, followed by Mumbai, Tokyo, Bangalore and New Delhi. Retail, described as very dynamic, ranks as the third most favored property type; and Ho Chi Minh City, Mumbai, New Delhi, Bangalore and Shanghai are listed as the top five markets in which to invest in retail properties.

    “Everywhere there is a drive for diversification of retail concepts – big box, factory outlets, and specialty retailing,” notes one respondent.The industrial/distribution sector, while not as glamorous as class A office buildings or high-end retail, will be recognized as a “major property type” next year, the report predicts.

    Currently, it is ranked fourth in offering investment potential, with Ho Chi Minh City, Shanghai, Bangalore, Mumbai and Guangzhouranked as the most promising markets for that category.

    The residential for-sale and apartment residential rental sectors ranked fifth and sixth, respectively, for investment opportunities; however, based solely on development prospects, the residential for-sale sector ranked first of any property type. “Urbanization in Asia Pacific property markets is a self-fulfilling economic factor for the supply and demand for residential space,” the report says. “As the percentage of the population moving to cities increases, demand for residential property grows…

    There is a clear message than understanding the current and future trends of apartment or residential segmentation such as low-income, middle-income, or luxury residential, is critical in sustaining the apartment sector.”The most promising markets for apartment rental investments: Ho Chi Minh City, Mumbai, Bangalore and Guangzhou.

    “As the years go by, Asia Pacific property markets will integrate more fully with the global economy, and,just as importantly, global property capital markets,” the report says. “If the quality and quantity of research, business intelligence, and transparency improve, then the atypical puzzles and learning curves of the marketplace will be replaced with maturity.”
    Last edited October 10 2007, 05:52 PM.
  • #2


    Re : Emerging Trends in Real Estate® Asia Pacific 2008.

    indian Real Estate market

    The Indian Real Estate market has seen ups and downs..Many factors have contributed to the growth of the Indian Real Estate market...The hike in interest rates by the Reserve Bank of India, the ongoing regulatory reforms by the government and enhanced liquidity place non-resident Indians in a very good position to park their excess funds in property back home।

    These factors, coupled with the phenomenal growth pattern currently being experienced by the real estate market in India, have not gone unnoticed on the real estate companies which have high expectations of overseas Indians।

    India’s FDI climbed to a record-breaking $11।2bn in 2006, a 155 per cent year-on-year increase. Reformed real estate investment regulations for Non-Resident Indians (NRIs) and more crucially foreign investors have provided the impetus to drive the value of the Indian real estate market towards $50bn by 2010.

    In 2005, the Indian government announced that FDI in the real estate sector was permitted through the ‘automatic route’, in other words without requiring additional ministerial approvals, streamlining the investment process। Certain guidelines are in place regarding minimum land areas to be developed and minimum capitalization requirements, but the net effect has been a massive inflow of foreign capital. It is estimated that capital worth $7bn will be pumped into development projects over the next year, much of that emanating from overseas.

    The boom is not at all surprising, what with a population of 1।2 billion, growing annually by 1.4 per cent, a cost effective and educated work force and economic growth of eight per cent per annum. These conditions combined with competitive interest rates and a burgeoning IT industry, are driving the demand for not only residential but commercial space that is expected to reach 70 m square feet within three years, with retail developments taking up to an 11 per cent share.

    The Indian government now has recognized the demands of NRIs and people of Indian origin to own pieces of property and over a period of time what we have seen is that the investment is both for them to come back and some form of speculation because India as a market now is giving good returns and the economy is booming so a lot of people are looking to come back.
    The rules have been much simplified and it has become much easier to buy property for the NRIs। The new act FEMA (the Foreign Exchange Management Act) that is a vast difference from the regulation act (FERA) has made a tremendous difference in acquisition of property and sale of property and even repatriation of money if one has got property and he is selling it of. Overall things have improved for NRIs and it is a great time to be here.

    The government of India has granted general permission for an NRI to buy property in India and he has to pay no taxes even while acquiring real estate India but however certain taxes have to be paid if he is selling this property। He would require a PAN card if he has rented out this property and he wants to repatriate that money but if it is going to be a sale of property depending on time or the duration of time he has held the property, the sale proceeds would be subject to capital gains tax and as of now if he has held the property for less than three years then he would be paying roughly about 30 per cent tax and if the property has been held for more than three years then 20 per cent as capital gains tax and that is what he will have to pay.

    The list of incentives is quite comprehensive and, for example, allow an NRI to acquire property in India with exception to agricultural/plantation property or a farm house without formal permission। They are also entitled to transfer this property to any resident Indian without the prior permission of any government agency. An NRI can also inherit property of another NRI provided the property in question was bought in accordance with the provisions of the foreign exchange law in force at the time of acquisition.

    However, a declaration form for acquisition of commercial property for carrying on any industrial, commercial or trading activity by their proprietary / partnership firm in India is required to be filed with RBI within 90 days from date of purchase।

    Money can be repatriated abroad if bought with the foreign exchange earned abroad. That too, only in the sale of two residential properties but any number of commercial properties.
    NRIs wanting to park their funds in India are taking the real estate market seriously enough to form informal groups to back select projects। Around 25 million NRIs are investing in immovable property in India, but unlike HNIs and financial institutions they are keen to invest in the housing segment, rather than commercial projects.

    NRIs tend to invest in residential properties in India, preferably in their native towns or cities where their relatives and friends can supervise such projects। However, funds are now being put into some commercially viable projects as well, such as malls, hotels and office complexes. Around $600 million has poured in from such investments in the last one year, with a single investment from a group averaging between $10 to 15 million.

    According to media reports, Law firms are receiving five to six enquiries every week from overseas Indians who club together and float a fund to build a property, stay on through the lock-in period, and sell it at a good profit।

    Jaipur, Hyderabad, Vijaywada, Ahmedabad, Baroda and Surat have seen groups of NRIs making such investments in malls, office spaces and residential townships। These investments are generally routed through Mauritius to avail of tax benefits.

    It is a win-win situation for both investors and real estate developers. The former earn handsome returns, while for the latter, it’s low-cost credit. Some projects in smaller cities have yielded as much as 50 per cent returns. The rise in interest rates is bound to bring real estate prices down in a few months’ time, and that would be the ideal time for NRIs to strike.


    Have any questions or thoughts about this?