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US-China trade war to boost real estate investments in India: Report

Other countries such as Vietnam, Malaysia, Thailand and South Korea have benefited from relocation of Chinese manufacturing. Photo: Aniruddha Chowdhury/Mint

MUMBAI : Despite coronavirus induced economic crisis, India will continue to see higher opportunities for real estate investment as the US-China trade war will influence cross-border activity for many years regardless of the US leadership, according to a report published by Savills, a real estate consultancy firm.

The ‘Impacts 2020’ report, studied the various social, environmental, demographic and technological ‘tipping points’ immediately facing global real estate.

“The impact of the covid-19 pandemic itself on investors’ strategies is much smaller than the role it’s playing in accelerating some underlying structural trends which have been developing for years. These include rising ecommerce demand, the fragility of global distribution networks – affected today by factory closures but increasingly by climate change – and the strengthening of a major new trading block across Asia and Australasia,” said Simon Hope, head of global capital markets for Savills.

While the ongoing trade conflict between the US and China will be overshadowed by the impact of the covid-19 pandemic this year, the report said that the ‘black swan’ event has already accelerated shifts in global trade patterns.

Other countries such as Vietnam, India, Malaysia, Thailand and South Korea have benefited from relocation of Chinese manufacturing.

While manufacturing exports from Vietnam to the US rose by almost 36% in 2019 making it the US’s fastest growing trade partner last year, the industrial rents in districts in Ho Chi Minh City rose 54% in the year to June 2019 as it became a major manufacturing market, the report said.

India has also seen an uptick in light industrial occupation, particularly in ancillary automobile industries, with Canada Pension Plan Investment Board, Blackstone and Brookfield among several investors who have already deployed large amounts of capital in its real estate market.

Separately, real estate associated with the life sciences sector is going to be one of the fastest growing targets for investment, as companies in the sector look set to accelerate growth and become prevalent in more geographies, the report said.

While $2.5 trillion of venture capital investments into the life science business was focused on US and China over the last five years, countries that saw particular strong growth in 2019 include India where investments into life sciences nearly doubled on a year-on-year basis, followed by Spain that saw about 83% growth, Australia nearly 79% and Austria that saw over four-fold growth, indicating that the future growth and therefore demand for real estate, including property assets from startup incubators and R&D facilities to office headquarter buildings, in the life science sector will come from these markets.

Further, companies may also look to diversify their supply chains across several global locations to insulate against possible future incidents. This is a trend that had already started in Asia as manufacturers took advantage of lower-cost locations outside of China, leading to greater investment in Vietnam, Cambodia and India.

source: livemint