The Leader - November/December 2007 - (Page 14)

IN vestIN G IN IN DIa : re W arDs aW aI t I Nv e s to rs W I th a lo NG -te rm v I e W FI G. 1 pIck a locatIoN carefully INDIa fDI coNfI D eNc e INDex taiwan netherlands indonesia mexico south Korea thailand singapore Brazil canada malaysia spain poland Russia Japan italy Hong Kong Australia France Germany united Kingdom india united states china 0 .5 1 1.5 2 2.5 However, there are concerns about India’s widening current-account deficit as the newly rich spend their money on foreign goods, and oil imports continue to run approximately US$24 billion. More troubling, the combined deficit of the central and the state governments stands at greater than 8 percent of GDP. In the short term there are numerous hindrances to growth, including a lack of potable water, poor roads, corruption and insufficient educational institutions. However, the political reforms are address- ing these matters. These changes take time in any economy, but in the world’s largest democracy – with coalition governments at the national and most state levels – these are very long-term fixes. India will experience many bumps along the way, and growth will not be a steady rise. But, India’s stature in the global economy will be far higher in the future than it is today. The long-term growth potential of the economy is positive. Therefore, investment decisions must be made with a long-term view. In India, not all places are the same in terms of economic and political risk factors, stability and infrastructure, making geography a critical part of the investment decision. For example, Mumbai real estate prices are high due to the “Paris” effect. In fact, 70 percent of the country’s GDP is generated within 62 miles (100 km.) of the city. Land constraints dictate a linear city expansion. As a result, in Mumbai’s ‘elite’ residential areas such as Malabar Hill, it is not unheard of for apartments to sell at Rs.35,000-Rs.45,000 per sq. ft. (approximately US$800 to $1,000 per sq. ft. or $8,608 to $10,760 per sq. m.) simply because it is a prime location with growing demand and virtually no new supply. We are more concerned about secondary and tertiary cities, where speculation has, in some cases, far exceeded the discipline of realistic supply and demand. For example, cities like Coimbatore (in Tamil Nadu) will see value growth due to favorable geographic constraints, as well as the presence of over 50 educational institutes ready to train the much-needed talent for companies relocating from Bangalore. However, similar price speculation on plots of land located 31 miles (50 km) outside of Gurgaon (in the middle of nowhere), should not reasonably trade for US$100,000 to $200,000 per acre ($247,000 to $494,000 per hectare). all real estate Is ultImately local Real estate remains a local business, and having a knowledgeable, legitimate and aligned local partner is a prerequisite. It would be advisable to enter India with the best and most reputable local developers to exploit their knowledge of the land, the market and the laws. However, the best developers generally have sufficient access to funds and do not need your 2 0 0 7 the le aDe r 14 November / December

Table of Contents Feed for the Digital Edition of The Leader - November/December 2007

The Leader - November/December 2007 Leadership Contents Message from the CEO Real Estate in the News Investing in India 110 to One Smaller Workspaces, Better Workspaces Innovating the Workplace Through Design Sustainability and Energy Efficiency Getting It Right Using Location Intelligence to Reinvent Franchises Philips International’s Ron Blanken CB Richard Ellis’ Karen Ellzey The State of Louisiana’s Mike Olivier Industry Tracker Economic Developer Directory Discovery Forum Findings Career Development Emerging Leader Economic Development in the News A Look Ahead Executive Development Spotlight

The Leader - November/December 2007

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