In a market that has seen a sharp decline in property values over the last few years, investors are taking on more risk in an attempt to capitalize on the rebound in the Indian market, the country’s biggest.
The Reserve Bank of India said on Tuesday it expects real estate investment to grow at an annualized rate of 8.9% in 2019, the fastest rate of growth in the world and more than triple the pace of growth during the global financial crisis.
That pace is likely to match the global average for the past three years, when investment growth slowed to 3.5% in 2016 and 3.1% in 2015, the central bank said.
India’s real estate market has been hit hard by the impact of the global economic slowdown, which has driven a sharp increase in home prices.
More than 7.5 million new homes were listed in India in the first six months of 2019, a 7.6% increase from the same period last year, according to the real estate arm of India’s real-estate regulator.
Investors have been looking to capitalize in India’s rapidly growing housing market by selling off distressed properties and selling properties with a high risk of failure, according a report from India’s National Real Estate Board.
“It is the case that, in the last 10 years, the overall number of new homes listed in the country has increased by 1,400%,” said Anurag Gupta, a managing director at ING Real Estate Advisors.
RBI data showed residential sales fell 4.3% in the year to June, with the industry still expected to show a boost this year.
Real-estate analysts have pointed to the government’s decision to slash interest rates and other policy changes to the market as well as the rising interest rates of real-tor groups as reasons for the increase in investment in India.
But the central government has not stopped all this growth.
It has cut interest rates for all but the highest-interest borrowers, loosened the rules on buying a home and raised taxes on a range of other sectors, including banks.
In June, the RBI lowered its interest rate on a one-year loan to 3%, while it also eased restrictions on purchases of homes, which is a major boost to home-buyers who have been forced to borrow to buy properties.
A central government report earlier this year found that property prices in India are expected to rise by 7.2% in 2021 from last year’s 8.2%.