Posted by: davidgarnerconsulting | September 7, 2009

BRIC Property Markets Lead The Way

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Real estate markets in Brazil, Russia, India and China may recover faster than those in Europe and the U.S., helped by faster economic growth, said Colin Dyer, chief executive officer of Jones Lang LaSalle Inc.

Among the four so-called BRIC nations, India and China will lead the way, the chief executive of the Chicago-based commercial real estate broker, said in an interview in Mumbai today. India’s export of knowledge-based services has remained robust even as exports of Chinese goods fell as much as 40 percent, Dyer said.

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India’s property sector, where prices have declined 30 percent, may begin to recover by the year-end or in 2010, as global companies still want to expand there, he said.

“Internationally, companies want to be in India to capture the growth as the market develops,” Dyer, 56, said. “All four have a good chance of recovering quickly and may well even lead European and U.S. economies, simply because of underlying growth in these economies.”

India, the world’s fastest-growing major economy after China, may attract as much as $12 billion in real-estate investment over five years, Dyer said.

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The $1.2 trillion economy got commitments for a similar amount over the past three years as its economy grew at an annual average of almost 9 percent to March 2008. The economy may grow at its slowest pace since 2003 in the year to March 31.

“Companies are still expanding here, and with that comes investment,” Dyer said. “India is a very attractive market and doesn’t compete with anybody.”

The South Asian nation’s prospects make it a draw for investors, he said.

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Investment Destination

“People want to invest in India and not want to weigh it against China or Russia or Germany,” Dyer said. “They are investing in India because it has strong medium-term growth prospects.”

The Philippines and Vietnam in Asia, Mexico, Argentina, Venezuela, Colombia and Chile in South America, Russia and eastern Europe are among other markets that may attract funds as real estate recovers, he said.

Still, global capital will first go to London and New York as international investors think London is close to bottoming out in pricing, Dyer said.

New York, which has declined about 25 percent, may have another 10 percent to decline from its peak prices. Volumes from the peak have dropped 70-75 percent, he said.

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“When the bottom is seen, pricing and yields are going to be very attractive,” Dyer said. “It will attract a lot of capital because it’s a safe, long-term investment, and a very deep real-estate market.”

Shortage of Capital

Indian developers are facing shortages of capital as the contagion of global recession hurts local income and demand for homes, offices and shops, and as plunging shares from last year and stimulus packages by governments hurt investor appetite for stocks and bonds.

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“Overseas funds are critical for the smooth completion of several real estate and infrastructure projects in India,” said Manoj Jain, an analyst with Stewart & Mackertich Wealth Management Pvt. in Mumbai. “Today, the issue is, where’s the money going to come from.”

Also deterring demand is a six-year rally in home prices to last year. In some neighborhoods of Mumbai and the national capital region of New Delhi, property prices doubled in three years.

Home sales are lower by a quarter over the year, even as the nation of more than a billion people faces a shortage of 22 million housing units, Macquarie Research said in a March 18 report. Prices in Mumbai have fallen as much as 15 percent, and 20 percent in New Delhi over the past year and may decline a similar extent over the next 12 months, Macquarie said.

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