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Knight Frank: Wait and see on Indian growth

Knight Frank: Wait and see on Indian growth

Thursday, 27 March 2008 12:00 AM

The Indian property boom which lasted for the majority of 2007 is likely to continue into 2008, but could be tempered by the credit crunch.

That is the view of international estate agents Knight Frank, which is advising buyers to "wait and watch for a month" before deciding to invest.

According to projections made by the Associated Chambers of Commerce and Industry of India (ASSOCHAM) during January, the Indian property market is expected to grow at a pace of between 40 and 45 per cent during 2008.

This follows growth of between 35 to 38 per cent in the last two years - largely as a result of huge investment which has poured into the country.

However, this projection may prove vulnerable to changes in world financial markets, argues Knight Frank.

"In certain cities, yes [the boom will continue]. In the centre of towns and cities such as Mumbai and Delhi the boom is continuing, but I do not know what is going to happen with the present situation," said Jaideep Singh, head of the India desk at Knight Frank.

"I think the boom could continue but everyone is waiting and watching for another week or ten days to see exactly what to do and where it is going to lead us to."

"I believe that we should wait and watch for a month," he added.

In further evidence of the market's strength, a survey conducted by the Association of Foreign Investors in Real Estate (AFIRE), published in February, found India's booming property sector has attracted foreign investors and figures in the top three property markets.

India now offers the best opportunity for capital appreciation in the world, following only the US and China.

Growth is being driven by the country's strong economy.

"The Indian economy is much better. The middle classes have made some money now so they can spend money," continued Mr Singh.

"All this time there was no such thing as mortgages in India but now the mortgage system has started to develop in India and people have money to spend. The economy is quite robust at present and the stock market is good there."

However, investment may require local co-operation.

"Foreign investors of non-Indian origin who are non-residents cannot buy property in India. The only way foreigners can invest is by buying through local people, so there are a lot of foreign investors joining up with locals, waiting for opportunities for ownership to come up," concluded Mr Singh.