India’s housing markets enjoyed an amazing growth spurt in Q2 2011. During year to Q1 2011, India-wide house prices rose by 21.3%. House prices in New Delhi rose by 33.64% during the year to Q2 2011 (22.7% in real terms) and by 16.67% from the previous quarter (15.84% in real terms), according to India’s National Housing Bank (NHB).
This was despite an economic slowdown which saw India’s gross domestic product grow by ‘only’ 7.7% during the year to Q2 2011, the weakest growth for six quarters, due to high interest rates and the poor performance of mining and quarrying (1.8% annual growth), construction (1.2%) and the manufacturing sectors (7.2%).
India ranked second out of 50 countries for annual growth of residential prices, in Knight Frank’s latest global housing price index.
House prices also soared in other cities, especially in cities with strong offshoring and business process outsourcing. Yet even cities that rely on manufacturing and electronics, which suffered during the financial crisis in 2009 (e.g. Hyderabad, Kochi, Bengaluru), are now showing signs of recovery.
House prices rose in almost all major cities in India from Q1 to Q2 2011.
Compared to last year:
• Property prices rose in all major cities covered by the NHB. The top five were Bhopal (46.41%), Faridabad (44.74%), Chennai (35.52%), Bengaluru (35.29%), and New Delhi (33.64%).
• The cities with the lowest price increases were Kolkata (10.23%), Surat (9.56%) and Jaipur (4.92%).
However India’s higher lending rates may still threaten to buyer demand. The Reserve Bank of India raised its repo rate by 25 basis points to 8.25% in September 2011, the 12th time that the central bank has hiked the interest rate since March 2010.
This was despite an economic slowdown which saw India’s gross domestic product grow by ‘only’ 7.7% during the year to Q2 2011, the weakest growth for six quarters, due to high interest rates and the poor performance of mining and quarrying (1.8% annual growth), construction (1.2%) and the manufacturing sectors (7.2%).
India ranked second out of 50 countries for annual growth of residential prices, in Knight Frank’s latest global housing price index.
House prices also soared in other cities, especially in cities with strong offshoring and business process outsourcing. Yet even cities that rely on manufacturing and electronics, which suffered during the financial crisis in 2009 (e.g. Hyderabad, Kochi, Bengaluru), are now showing signs of recovery.
House prices rose in almost all major cities in India from Q1 to Q2 2011.
Compared to last year:
• Property prices rose in all major cities covered by the NHB. The top five were Bhopal (46.41%), Faridabad (44.74%), Chennai (35.52%), Bengaluru (35.29%), and New Delhi (33.64%).
• The cities with the lowest price increases were Kolkata (10.23%), Surat (9.56%) and Jaipur (4.92%).
However India’s higher lending rates may still threaten to buyer demand. The Reserve Bank of India raised its repo rate by 25 basis points to 8.25% in September 2011, the 12th time that the central bank has hiked the interest rate since March 2010.
Analysis of India Residential Property Market »
RENTAL YIELDS
Last Updated: Apr 20, 2011
Prices of apartments in Mumbai continue to rise, astoundingly. Prices of US$17,000 per square metre (sq. m.) are typical for 300 square metre luxury used apartments in Mumbai’s prime areas. Smaller apartment sized sell for around US$11,600 to US$14,000 per sq. m..
Rents in Mumbai have not kept pace, and as a result rental yields on apartments have slipped to 2.5% to 2.8%. At this level, few landlords can make money, once costs are stripped out. Given that the Global Property Guide’s figures are for gross rental yields, i.e., do not make any allowance for vacant periods, for legal costs, administration costs, cleaning and repairs, rental taxes, property taxes, and other taxes, etc, it is safe to say that landlords in Mumbai earn very little on their apartments.
Property prices in New Delhi have continued to rise this year. They are moving toward the US$4,000 per square metre range for used apartments in prime areas.
In Bangalore prices continue to be very reasonable, at around US$1,000 to US$1,300 per sq. m. for a used apartment in a prime district. Rents also continue to be low, so that gross rental yields of around 3.5% to 4.2% can be earned.
Rents in Mumbai have not kept pace, and as a result rental yields on apartments have slipped to 2.5% to 2.8%. At this level, few landlords can make money, once costs are stripped out. Given that the Global Property Guide’s figures are for gross rental yields, i.e., do not make any allowance for vacant periods, for legal costs, administration costs, cleaning and repairs, rental taxes, property taxes, and other taxes, etc, it is safe to say that landlords in Mumbai earn very little on their apartments.
Property prices in New Delhi have continued to rise this year. They are moving toward the US$4,000 per square metre range for used apartments in prime areas.
In Bangalore prices continue to be very reasonable, at around US$1,000 to US$1,300 per sq. m. for a used apartment in a prime district. Rents also continue to be low, so that gross rental yields of around 3.5% to 4.2% can be earned.
TAXES AND COSTS
Last Updated: Feb 02, 2012
Rental Income: Net rental income is taxed at progressive rates, from 20% to 30%.
Capital Gains: Capital gains are taxed at the standard income tax rates.
Inheritance: No inheritance or gift tax is levied in India. But a wealth tax of 1% is imposed if the net wealth exceeds INR3 million (US$60,599).
Residents: Residents of India are subject to tax on their worldwide income at progressive rates, from 10% to 30%.
Capital Gains: Capital gains are taxed at the standard income tax rates.
Inheritance: No inheritance or gift tax is levied in India. But a wealth tax of 1% is imposed if the net wealth exceeds INR3 million (US$60,599).
Residents: Residents of India are subject to tax on their worldwide income at progressive rates, from 10% to 30%.
BUYING GUIDE
Last Updated: Jun 12, 2007
Total roundtrip transaction costs, i.e., the cost of buying and selling a property, are between 7.5% and 17%, inclusive of the agent’s fee of 1.1% to 2.1% (inc VAT). Stamp duties and registration fees vary according to city and locality.
The total cost of property registration is around 7.9% of the property value. The six procedures required can be completed in roughly 67 days.
The total cost of property registration is around 7.9% of the property value. The six procedures required can be completed in roughly 67 days.
LANDLORD AND TENANT
Last Updated: Jun 20, 2006
Indian law is pro-tenant.Rent Control: For Delhi, the maximum annual rent is 10% of the cost of construction and the market price of the land. But both construction cost and land price are based on historical values, not on the property's current market value.
Tenant Security: It is difficult for a landlord to protect his property from unwanted overstaying tenants. Though contracts may be enforceable in the courts, the enforcement process is likely to take years, or even decades.
ECONOMIC GROWTH
Last Updated: Oct 03, 2011
High inflation will slow growth
India is one of the world’s fastest growing economies, ranking ninth largest in terms of nominal GDP. However, economic growth for 2011 is likely to slow to around 8%.
Inflation reached a 13-month high of 9.87% in September 2011, more than double the RBI’s target of 4% to 4.5%. As a result the economy’s growth is expected to slow to 8% this year, down from 10% in 2010.
Investment growth slowed to 0.37% in Q1 2011 from 7.8% the previous quarter, due to rising interest rates. Consumer spending growth was 8%, down from 8.6% in the previous quarter.
The tempering of growth is also due to the reduction in the fiscal deficit. From a deficit of 5.1% of GDP at the end of March 2011, the government is targeting a deficit of 4.6% of GDP by the end of the current fiscal year in March 2012.
Flashback to the global crisis
If there is a slowdown, it won’t be the first. During the world economic downturn in 2008, India’s developers cut prices and introduced lucrative deals such as subsidized furniture and internet connections.
Demand for luxury housing fell 50%, while affordable housing demand fell 10%, according to a May 2009 survey by the Associated Chambers of Commerce and Industry of India (Assocham). House prices in Delhi fell by as much as 13.08% during the year to H2 2009. Developers refocused on building low-income homes.
But India’s economy quickly rebounded, and house prices soon started rising again.
Inflation reached a 13-month high of 9.87% in September 2011, more than double the RBI’s target of 4% to 4.5%. As a result the economy’s growth is expected to slow to 8% this year, down from 10% in 2010.
Investment growth slowed to 0.37% in Q1 2011 from 7.8% the previous quarter, due to rising interest rates. Consumer spending growth was 8%, down from 8.6% in the previous quarter.
The tempering of growth is also due to the reduction in the fiscal deficit. From a deficit of 5.1% of GDP at the end of March 2011, the government is targeting a deficit of 4.6% of GDP by the end of the current fiscal year in March 2012.
Flashback to the global crisis
If there is a slowdown, it won’t be the first. During the world economic downturn in 2008, India’s developers cut prices and introduced lucrative deals such as subsidized furniture and internet connections.
Demand for luxury housing fell 50%, while affordable housing demand fell 10%, according to a May 2009 survey by the Associated Chambers of Commerce and Industry of India (Assocham). House prices in Delhi fell by as much as 13.08% during the year to H2 2009. Developers refocused on building low-income homes.
But India’s economy quickly rebounded, and house prices soon started rising again.
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