Brexit: Real estate, study, vacationing in UK becomes attractive for Indians

New Delhi - Indian investors may look at acquiring properties in the UK, including in London, following devaluation of pound and fall in real estate prices due to Britain’s exit from European Union. Apart from making real estate cheaper, the softer pound will also tender studying and holidaying in that country more affordable for Indians.

According to a Reuters report, the British pound fell as much as 10 percent against the US dollar on Friday to levels last seen in 1985 on fears the decision could hit investment in the world’s fifth-largest economy, threaten London’s role as a global financial capital, and usher in months of political uncertainty.

According to a report in the Business Standard, the rupee fell 1 percent against the dollar but rose 7.5 percent against the pound.

The pound seen declining further going ahead. This is likely to encourage more students from India to take up education in that country, according to experts. “A drop in the pound could also result in an increase in students from India choosing the UK as a destination as it will make education significantly cheaper there,” Yatra.com President Sharat Dhall has been quoted as saying in a report in The Times of India.

Tourism to the UK is likely to increase too. “…For those planning a vacation in the immediate future, the exchange rates are expected to provide for 5-7 per cent savings in package costs,” said Rakshit Desai, managing director of FCM Travel Solutions, has been quoted as saying in a report in the Business Standard.

On the real estate front, FDI and private equity inflow into the Indian real estate sector may be impacted adversely, experts feel. Leasing activities of office and retail spaces would not be affected much.

The UK - particularly cities like London - has always held a special attraction for Indians, particularly HNIs, with business interests or families there, he said, while adding such individuals would certainly keep a close watch on the effect of Brexit on UK s property prices.

“It is very likely that many more Indians will seek to invest there,” Anuj Puri of JLL has said.

Commenting on the development, CBRE Asia Pacific Head of Research Henry Chin said: “In the short term, we expect APAC investors to adopt a wait-and-see approach while they receive more clarity on the future developments arising from the UK’s decision to leave the EU.”

“CBRE expects some hesitancy from investors, however, the UK, especially London, will continue to remain attractive for Asian investors driven by the inherent attractiveness of the market, including its transparency, political stability, market liquidity and the openness of its legal framework for foreign investors, which includes their tax structure,” Chin said.

“A decline in the value of the sterling could also be a catalyst for increased foreign investment in the UK due to attractive returns,” CBRE said.

Knight Frank India CMD Shishir Baijal said: “The combination of lower prices and devaluation of the pound should draw in Indian investors looking to acquire assets in the UK.”

“London has always been a favourite destination for Indian property buyers and it augurs well for the Indian investors to make their move now,” he added.

On impact on investment in Indian real estate, Puri of JLL India said: “Investors will now be in a risk-off mode, meaning more number of investors would either pull out investments or stay put without investing further until clarity emerges.”

“Until today, year 2016 was looking seemingly positive for real estate sector in terms of investment inflows (read PE or FDI inflows), but now that is somewhat at risk,” he added.

Stating that recovery of Indian real estate would continue on the back of a resilient economy, Puri said Brexit would not disturb that recovery much, since India’s office market leasing is dependent only by 5-7 per cent on UK-based firms.

On leasing market, JLL said the commercial real estate decisions are made with a medium to long term view and as of now it seems unlikely that these will be affected in India.

However, the consultant said that a possibility of EU slowing down could have an adverse impact on revenues of IT firms, which are major occupier of office space in India every year.

With PTI