Investor Irrationality in Property Markets: An analysis of Bengaluru

Investor Irrationality in Property Markets: An analysis of Bengaluru
Tuesday, 26 November 2013 Add to Calendar 2013-11-26 10:15:00 2013-11-26 13:00:00 Asia/Kolkata Investor Irrationality in Property Markets: An analysis of Bengaluru CPR-CSH Workshop on Investor Irrationality in Property Markets: An analysis of Bengaluru by Piyush Tewari of University of Melbourne, Australia.  Date:               Tuesday, 26 November 2013 Time:               3.45 p.m. Venue:             Conference Hall, Centre for Policy Research, Dharma Marg, Chanakyapuri, New Delhi 110 021 ____________________________________ Commercial property prices in Bengaluru witnessed secular growth from 2004 onwards. However, this growth has not been uniform at the sub-regional level. Analysis of commercial property yields (capitalization rates) in Bengaluru suggests distinct spatial patterns. Locations such as Whitefield and Electronic city witnessed shortening of yields prior to 2005 compared to the central and secondary business districts, due to preference of these locations by the IT industry (a major driver of the economy in Bengaluru). However, after 2005, the relocation of international airport and delays in other infrastructure projects impacted property yields in these locations. Results from cap rate modelling confirm that investors have generally been ‘backward looking’. With a rise in rents, relative to historical average, yields shorten. Macroeconomic factors such as general risk spread in the economy have also affected yields at the local level. A rise in risk spread increases local commercial property cap rates. Contrary to the perception that liquidity, as measured by change in M2/GDP, has been driving Cap rates, its effect in Bengaluru has not been found to be statistically significant. Piyush Tiwari is currently Head of Property at University of Melbourne, Australia. He is also Associate Dean and Director of School of Real Estate, RICS School of Built Environment, NOIDA, India. His prior positions were at the Infrastructure Development Finance Company (IDFC), India, University of Aberdeen, UK, HDFC, India and University of Tsukuba, Japan.  His research interests include infrastructure policy, housing economics and mortgages, commercial real estate investment, and financing infrastructure in developing countries. He is Member, International Property Measurement Standards Committee of International Property Measurement Standards Coalition. His other professional activities include Vice President, Asian Real Estate Society, Associate Editor, International Real Estate Review, Editorial Board, Property Management and Member RICS VIC/TAS Education sub-committee. He can be reached on piyush.tiwari@unimelb.edu.au.  He received his PhD from IGIDR, Mumbai.   -----------------------------------------------------------------...
10:15 am to 1:00 pm
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CPR-CSH Workshop on Investor Irrationality in Property Markets: An analysis of Bengaluru by Piyush Tewari of University of Melbourne, Australia. 

Date:               Tuesday, 26 November 2013

Time:               3.45 p.m.

Venue:             Conference Hall, Centre for Policy Research, Dharma Marg, Chanakyapuri, New Delhi 110 021

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Commercial property prices in Bengaluru witnessed secular growth from 2004 onwards. However, this growth has not been uniform at the sub-regional level. Analysis of commercial property yields (capitalization rates) in Bengaluru suggests distinct spatial patterns. Locations such as Whitefield and Electronic city witnessed shortening of yields prior to 2005 compared to the central and secondary business districts, due to preference of these locations by the IT industry (a major driver of the economy in Bengaluru). However, after 2005, the relocation of international airport and delays in other infrastructure projects impacted property yields in these locations. Results from cap rate modelling confirm that investors have generally been ‘backward looking’. With a rise in rents, relative to historical average, yields shorten. Macroeconomic factors such as general risk spread in the economy have also affected yields at the local level. A rise in risk spread increases local commercial property cap rates. Contrary to the perception that liquidity, as measured by change in M2/GDP, has been driving Cap rates, its effect in Bengaluru has not been found to be statistically significant.

Piyush Tiwari is currently Head of Property at University of Melbourne, Australia. He is also Associate Dean and Director of School of Real Estate, RICS School of Built Environment, NOIDA, India. His prior positions were at the Infrastructure Development Finance Company (IDFC), India, University of Aberdeen, UK, HDFC, India and University of Tsukuba, Japan.  His research interests include infrastructure policy, housing economics and mortgages, commercial real estate investment, and financing infrastructure in developing countries. He is Member, International Property Measurement Standards Committee of International Property Measurement Standards Coalition. His other professional activities include Vice President, Asian Real Estate Society, Associate Editor, International Real Estate Review, Editorial Board, Property Management and Member RICS VIC/TAS Education sub-committee. He can be reached on piyush.tiwari@unimelb.edu.au.  He received his PhD from IGIDR, Mumbai.  

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This is the forty sixth in a series of Urban Workshops planned by the Centre de Sciences Humaines (CSH), New Delhi and Centre for Policy Research (CPR). These workshops seek to provoke public discussion on issues relating to the development of the city and try to address all its facets including its administration, culture, economy, society and politics.  For further information, please contact: Jayani Bonnerjee at jayani.bonnerjee@csh-delhi.com, Marie-Hélène Zerah at marie-helene.zerah@ird.fr or Partha Mukhopadhyay at partha@cprindia.org