WEB FEATURE: Global Market Report: Asia
Multi-Housing News
By Joshua Pringle
In the United States, the multifamily sector of commercial real estate has been hot, fairing extremely well coming out of the global economic meltdown and looking promising for the foreseeable future. There are more people ready to rent than there are units to put them in. However, the rental market seems to be flourishing strictly within the confines of the U.S. borders. Opportunities do exist for U.S. investors and developers looking to penetrate foreign markets, but the number of hindrances they meet along the way is staggering.
...Despite its burgeoning economy, differences in income, differences in consumer perspective and knots in its infrastructure make India a tough room to enter. "For foreign developers it's very difficult," Richard Green, director of the USC Lusk Center for Real Estate Development, tells MHN, "because there are laws about who can own property. You can invest, but you're almost certainly going to be a minority in the property. Another pitfall is, the court's enforcement of leases is spotty. If you have a tenant you want to kick out, it might take six or seven years in the courts before you actually get resolution."
Green adds that yields are tiny in India, running in the neighborhood of 1 to 2 percent. "The second thing," Green says, "is that vacancies are high because it's hard to build down to the bulk of the Indian market. To put India in some perspective, if you look at the cutoff for the top 10 percent of income in India, it's about the same as the bottom 10 percent of income in the U.S. It's just a little higher than that." For those who might want to build large-scale, U.S.-style communities, this presents obvious difficulties.
Indians are also of a different mentality than the average American renter, in that they typically stay at home and save their money until they can buy a condo. These differences in mentality and infrastructure are evident in other countries as well, keeping many U.S. companies understandably at bay. Green says, "People kind of kick the tires on this, and then they realize how hard it is and they don't do it."