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Property Demand Resurges in India - 21 September 2009

Investors are once again interested in India’s housing market after residential prices dropped as much as 30 percent earlier this year.

The country’s largest home developer, DLF, sold close to 1,400 units in one day alone this spring; while in Mumbai, another company sold 90 percent of its premium apartments in less than four months, a surprising economic feat after the market’s sudden downturn in 2008.

While some real estate companies, including DLF, have been quick to adjust property rates due to the recent demand—increasing newer housing projects by 15 to 20 percent in the last few months—many economists believe price levels will still stay at all-time low. In the last quarter of 2008-09, developers cut middle-income home prices by 25 to 30 percent, after sales fell 50 percent from the housing market’s peak in 2007.

Despite a few recent economic dips, India has been on the radar of property investors for last eight years. It’s still one of the fastest growing economies in the world with an increasing middle class and strong technology industry that’s driving entrepreneurs to relocate to the world’s second largest country. Cities like New Delhi, Bangalore and Mumbai have been built up with residential and commercial properties to accommodate India’s BRIC (Brazil, Russia, India, China) powerhouse status— a conglomerate of countries expected to dominate the global market in the next ten years.

The increased interest in Indian real estate may also be an example of investors wanting what they can’t have: Nonresidents, tourist visa holders and business partners of the two are restricted from buying properties in most areas of the country, and are only allowed to lease properties for a period of no more than five years. However, economists encourage those looking to establish residency and take advantage of IT opportunities in India to invest in real estate now, as values will appreciate around 2011.

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