Filthy lucre
It may be one of the most polluted cities in India, but investors are scenting a profit in Amritsar
Dean Nelson
From the road, the yellow wheat fields that spread from the border with Pakistan to the Sikh holy city of Amritsar look like a Bollywood film set waiting for the dancers. It’s classic Punjabi pastoral, with turbaned farmers tilling the fertile land. The mistake is to open the car window: the black sludgy river in the foreground is an open sewer that doubles as a rubbish tip and chemical-waste dump.
Given the stench, it is few people’s vision of a place in the sun. But Britain’s Indian community detects a whiff of opportunity in the air, and is pouring its money into the area’s booming property market.
Amritsar is at the heart of the extraordinary boom that has seen the Indian economy growing at almost 10% a year – up from 3% a decade ago. The city has grown rich on the rise of call centres, IT outsourcing and textiles, and the money is beginning to flow into its property market.
“The residential property market has grown rapidly over the past two years, by an average of 60%-70% in Mumbai, 70% in Delhi, 60%-75% in Bangalore, and 95%-100% in Chennai [Madras] and Hyderabad,” says Harvesp Mehta, the national director of investments for the Indian office of the estate agency Knight Frank, which expects prices across the country to continue to rise over the next two years, albeit at a more modest rate.
Analysts expect that such growth will soon be replicated in “second-tier” destinations such as Amritsar, where Knight Frank says prices have gone up by 40%-60% over the past two years. “Some of these small cities, such as Baroda, in Gujarat, will grow by 5m people over the next 10 years,” says one British-Indian merchant banker in the City of London. “That makes them a good bet for British-Indians to invest in.”
Most of his Indian friends, he says, are hunting for “the next Bangalore” - a small Indian town with “worthless rice paddies”, he says, that became “multimillion-pound residential plots” when the city became the heart of India’s IT revolution. His picks have been in Goa and Calcutta.
There is no doubt that India needs more homes - about 20m more by 2012, according to government figures. Need is only a part of it, though; also crucial, in terms of the market, is desire. As India’s 300m-strong middle class gets richer, there is an increasing desire to escape the appalling infrastructure, the stench of the sewers, the erratic power supply and the squalid streets.
In general, the ideal property is a flat in a modern, gated community, where residents can show off the latest computerised lighting systems and wireless hi-fi, and have guaranteed electricity and water, and access to smart shops, pools and health clubs.
Happily for investors, the demand for such homes is easily outstripping supply, which is why leading western investment banks such as JP Morgan, Citigroup and Credit Suisse have raised £500m to invest in new building projects in India.
It is also why smaller entrepreneurs are betting on cities such as Amritsar. Take Amar Sodhi, managing director of Avatar International, in London. Last week, the first 48 off-plan flats from the company’s Windsor Apartments, about a mile from Amritsar airport, went on sale, with prices starting at £39,000 for a two-bedroom, 113-square-metre flat. The properties would not look out of place in the London Docklands. Designed to suit the taste of British-based Indians, they boast “gourmet kitchens” and whirlpool baths. There is also a club with pool, spa and squash courts.
The apartments are in one of India’s worst pollution blackspots. Yet half of the first batch have been reserved by investors confident of doubling their money before the keys are handed over in 2009.
“There are 25m wealthy Sikhs around the world, and Amritsar is the home of the Golden Temple,” Sodhi says. “There are 600,000 Sikhs in Britain alone, and they like to travel to Amritsar, but good accommodation is limited.” He is particularly encouraged by the decision of the Radisson chain to build a five-star hotel next door.
Joginder Nijjar, and his wife, Nirmal, both solicitors from Walsall, agree with Sodhi’s analysis. Over the past 18 months, they have remortgaged their UK home and thrown in their life savings to invest more than £1m in residential and commercial projects in Amritsar and Delhi.
Nijjar says he had considered investing in India in the past, during visits to relatives, but was put off by fear of corruption. “You always think you’re going to get ripped off, but now there are good companies coming into the market,” he says. “I’m hoping for a rise of a couple of hundred per cent.”
Dilip Patel, 47, a knitwear manufacturer from Leicester, and his wife, Illa, signed up two years ago to buy a two-bedroom flat in the Ozone development, in Goregaon, Mumbai. They paid £60,000; similar properties are expected to go for double that when the complex is completed towards the end of next year. “Now I’m looking for another flat,” Dilip says.
British-Indians can buy under special provisions for those classed as people of Indian origin. By contrast, those without an ethnic link to the country can do so only if they have spent 182 days in the previous financial year living in India on a nontourist visa.
The rules have already been relaxed for commercial property, and there is speculation that the government could follow suit for flats and houses. In the meantime, you can get around the curbs by establishing a company in India and buying a property in its name to rent out as a holiday flat.
Free with every purchase is the unmistakable smell of the subcontinent - but Sodhi, for one, does not expect it will put off the buy-to-let investors he’s targeting. “Some of these places do stink,” he admits. “As a child, I used to get asthma in nearby Ludhiana, but today it has more Mercedes cars than anywhere in India, and some of its houses sell for £1m. The smell won’t harm the investment.”
http://property.timesonline.co.uk/tol/life_and_style/property/overseas/article2497982.ece
