After years of lackluster growth
and wasted potential India is turning a corner. New Prime Minister Mr. Narendra
Modi promised to kickstart the economy and a raft of reforms already are
yielding faster growth and new investment. But as JLL India’s Mr Anuj Puri
explains, excitement is tempered with caution at this critical junction for
Asia’s second biggest economy.
Since Mr. Narendra Modi’s landslide election
victory in May there has been no shortage of good news from India. GDP growth
is accelerating, inflation is easing, the stock market is climbing to new
highs, an Indian spacecraft is orbiting Mars. On the streets and in business
meetings a new vibrancy is palpable, says J LL India, Chairman and India
Country Head, Mr. Anuj Puri.
“The mood is extremely positive; there’s a
bounce in everybody’s step. Mr. Narendra
Modi has a full majority and a pack of educated ministers aligned to his
ambitions. He has moved politics from being about caste and creed to the
economy and it is already translating into growth.”
New interest from foreign investors is
reflected in Mr. Anuj Puri’s schedule.
“My diary is certainly much fuller” he says. “We’re seeing new interest from
Chinese and Japanese investors who have started to do the rounds. Large
delegations are requesting meetings with us. They want to understand India in
great depth, which previously wasn’t the case.”
Indian diaspora..!
A wave of new Foreign Direct Investment (FDI)hitting
Indian shores is critical to Mr. Naredra
Modi’s economic reform plan. His state trip to Japan in August and a visit from
Chinese president Xi Jinping last month are reported to have secured billions
of dollars of new investments over the next five years.
In New York last month the Indian diaspora
gave Modi a rockstar’s reception with more than ten thousand expatriates gathering
at Madisson Square Garden to hear him speak. He left the stage for a round of
meetings with CEO’s from America’s biggest multinationals.
 |
| Prime Minister Mr. Narendra Modi |
But Mr. Anuj Puri is measured in his
excitement about Mr. Narendra Modi’s potential, reporting scepticism in some
quarters.
“The business community is aware that if Modi
can’t lift India’s economic growth into super-sonic speed in the next two years
then you might say we’re doomed. And that’s very unnerving.
“Old investors aren’t coming back. Those
players who were burned so badly in the past – when the rupee depreciated or
government approval didn’t materialise fast enough – are staying away.
“Scepticism also surrounds the bureaucrats
who are ultimately responsible for writing the policy that will effect change.
They’ve enjoyed power for fifty years now and their appetite for change hasn’t
been tested yet.”
Jobs market…!
Early indicators provide reassurance. Recent
government data shows increased exports and rising manufacturing output. With
more than half of its 1.27 billion population under the age of 25, India needs
to create 10 million new jobs annually to absorb new entrants to the jobs
market.
To that end Mr. Narendra Modi has launched a “Make in India” campaign, urging
foreign investors to view India as a manufacturing hub as well as a market of
millions of potential new consumers. Mr. Anuj Puri says this new focus is
boosting demand for industrial and corporate real estate, especially in banking
and financial services, automobiles, pharmaceuticals and FMCG sectors.
“I’m confident a manufacturing revival can
happen, India has considerable skilled labour available and can really deliver
in sectors like automotive on an outsourcing basis.
Challenge in infrastructure..!
“The only challenge is infrastructure. Roads,
railways, ports, airports need upgrading to progress industrial activity in
India. It features in every one of Mr. Narendra Modi’s speeches and we know
he’s focused on accelerating Public Private Partnerships.”
Residential real estate is yet to experience
the same upward movement.
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| Mr. Anuj Puri, JLL India. |
“We thought that as sentiment improved there
would be an immediate increase in the take-up of luxury residential property
and more liquidity in the sector” says Puri. “That hasn’t happened, but the
causes are structural, not political.
Demand is for affordable housing..!
Most developers were highly over leveraged
and demand is for affordable housing, not the premium luxury products that are
in over-supply.”
The real estate landscape could look very
different in two years’ time if economist’s predictions come to fruition that
by 2016 India will overtake China as Asia’s fastest growing economy.
It will depend on whether PM Mr. Narendra Modi
can turn promise into practice and increase the purchasing power of millions of
Indians.
As Mr. Anuj Puri is keenly aware, the only
certainty is that the stakes are high. “India is at an exciting but
precariously balanced junction” he says. “If it goes pear-shaped there’ll be a
huge amount of negativity and huge challenges to match.
But If Mr. Narendra Modi can steer the country in the
right direction, India will be the growth story of the century.”
*(according to World Bank on basis of PPP)
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