Potential investors considering investing in the Mumbai Metropolitan region are in for a shock as the realty market around the MMR is competing with that of California, in the U.S. Added to the existing rush is the proposed metro rail project which is all set to catapult the market price further.

The illogical rise in prices of land — residential and office spaces — may act as a stumbling block for the growth according to the industry bodies and NRIs. Bankers too opine that such a scenario would prove to be counter-productive to the expected industrial eco-system.

The California-based NRI are put off by the mad realty rush. “This is a never-before-price and there is no logic behind it. When I make a realistic comparison, land around California is cheaper than the eastern Mumbai region. Investing here doesn’t make any business sense” they say.

While an acre near Livemore in California costs about Rs. 5.5 crore, the same stretch is priced at Rs.24 crore on the outskirts of Thane.

The Confederation of Indian Industries (CII) is of the opinion that the development is definitely a setback for the potential investors. “Not a happy situation. Industrialists are expected to invest on machinery and other aspects besides land. The break-even period will be delayed significantly which may discourage potential investors,” he felt. On the other hand, the present situation is seen as once-in-a-lifetime opportunity for the small and big real estate firms to make a quick buck. The government has banned conversion of agricultural land and named hundreds of illegal layouts to prevent price rise but it did not yield any result. Market experts say that it’s realty bubble in the making.

“The local people are becoming millionaires overnight, purchasing swanky cars and blowing up money on luxuries. Now you see the bubble bursting as the economy is slowing down and the people have stopped making much inquiries about investing in the region. Illogical rise in prices of land may act as a stumbling block for growth.

US NRIs have been always keen on investment in their home country. The demand for Indian real estate is estimated to be 25-30 lakh. However, it is not the same case in all the Indian cities. There are end users who want to invest in some specific cities for their families preferences as well as investors looking for time to time returns on investment.

Apartments are the most preferred choice by a majority of NRIs but the demand mainly revolved around units in the price range of Rs 60 lakh to Rs 1.25 crore. Incidentally, NRIs from California region are less interested in villas for cities like Bangalore and Chennai. Other cities that drive demand include Hyderabad, Mumbai, Pune and Delhi. However, the demand for Hyderabad has raised especially after the bifurcation of the state into two.

Among the secondary cities that drew demand were Coimbatore, Mysore, Mangalore, etc. There has been a constant demand for medium-term investment in selected options like developed plots in the price range of US$10,000-30,000. NRIs prefer to leverage the appreciation to invest in larger units at a later stage as they are very well aware that land appreciates at a much faster rate in India than any other asset.

Time to time returns on investment through rental income and availability of property management services are among the major criterias for investors to get interested in investment in integrated township projects.

NRIs from cities like Houston show high level of interest towards Indian real estate as their local market does not provide the flexibility of deploying funds locally in order to earn more rental income. Thus, as per the realtors there is a shortage of housing in the local market.

The demand for villas priced over Rs 3 crore did not evince much response as high-end units require specific marketing and not typical property shows targeted to attract all types of investors. Instead exclusive road shows and HNI meet are more better options which would prove to be beneficial for real estate developers while marketing niche products among target audiences. But this has to be well packaged as investors are more interested in the after-sales services offered by the developers through property management companies in today’s scenario.