Indian expats look at London as a hot realty destination

Many Indian investors are exploring opportunities to invest in the United Kingdom, especially in London, primarily due to the devaluation of the Pound and the fall in property prices post Britain’s exit(BREXIT) from the European Union.

During a speech in December 2012, Theresa May (the present British Prime Minister) claimed that more than a third of all new housing demand in Britain was caused by immigration. “And there is evidence that without the demand caused by mass immigration, house prices could be 10% lower over a 20-year period.”

The housing crisis in London has emerged to a level that the 2011 census revealed that “the indigenous had become a minority in their own capital.” London (with just 12% of the national population) was associated with 40% of the inflows, 30% of the outflows, and absorbed 67% of the net balance of the overseas immigration.

Additional demand from migrants and foreign investors has put pressure on house prices and also accelerated the demand for development of the right infrastructure. Additional pressures exist on the costs of housing, transportation services, health provisions, schools and social security benefits to be reasonable. Thus the importance of affordable housing that is self-sufficient.

The only savior to London’s housing crisis can be new self-sufficient cities far from the existing cities, where the cost of the land is not a significant fraction of the total developmental costs itself. However, mostly, these lands should be accessible by major railways and highways. These international markets being easily accessible to major transportation networks are appealing to developers.

Usually in Mumbai, in the projects where the cost is viable, the land is far away from any source of infrastructure. This is seen across cities in India. This infrastructure deficit is a key challenge, as well as the costs of getting approvals. However in the case of London, the infrastructure is comparatively better and hence it offers a better opportunity for the emergence of the affordable housing segment.

Also, the affordable housing business has to be looked from a cash-flow perspective than as a land bank or an asset ownership business. This will impact how the business is valued, and in turn reflect in valuations across the industry. The risk factor is that the costs associated with the scalability of the business cannot be borne by many developers. Expanding the business geographically, understanding the country-specific situations, buying land and then creating a brand in different locations is very challenging, which is not a piece of cake for all developers.

The developer should have the required experience, the credentials as well as an attitude that affordable housing, apart from being a scalable business is also a social requirement. The developer has to ensure that his organization is extremely transparent, as the market rewards less complicated and highly transparent companies, with earnings and cash flows.

The city of London with a huge Indian population offers the required base to an Indian developer. HNIs perceive Indian developers with projects abroad to be sophisticated with global know-how, which helps the developer with the required brand credibility.

The expertise of Indian developers in the affordable housing segment, added to the fact that London is an international city, brings an added advantage to the table.