Jones Lang LaSalle says India property valuations at an all-time low

MUMBAI: Valuation of Indian real estate sector is currently at an all-time low as the sector's financing and construction costs have been going up, said property consultant Jones Lang LaSalle India in a study release on Thursday.

Currently, in Indian realty sector cost of debt is north of 16% for construction and 20% for acquisition finance. Developers' input costs are staggering, with the cost of construction per square foot up by 20% from a year ago, Jones Lang LaSalle said.

Global real estate funds have started avoiding Indian property in the backdrop of current uncertainty and ongoing policy paralysis. Only domestic funds and managers such as IndiaReit, Kotak Realty Fund, Red Fort Capital and ASK Property Investment Advisors are showing interest in investing in the sector, the release said.

Whatever capital is now chasing real estate in India is almost exclusively focused on Mumbai, Delhi and Bangalore, as these three cities have been displaying an extremely fast pace of real estate growth exceeding 30% per annum. Also, close to 2/3rd of the overall development of office space in the country is now taking place in Mumbai, Delhi and Bangalore.

However, JLL also added that demand for the right projects in the right locations remains high. For domestic investment managers, this is the best time to invest into the sector.