The Impact of Indian Real Estate BuyersFebruary 14, 2014
Over the past few years, there has been much media attention on the impact of foreign buyers of Silicon Valley real estate. While most of this attention has been focused on Chinese buyers and investors, there is another group that plays an important role in Silicon Valley, the Indian buyers.
Although some of the concerns that impact any overseas buyer remain the same, such as obtaining financing and working in an unfamiliar legal and tax system, certain characteristics are a bit different with Indian buyers.
Recently, Ken and I completed a two and a half week trip to several of the main tech centers in India, including several days in Bangalore, Chennai, Hyderabad, Mumbai, and Delhi. During this trip, we met with some top Indian real estate agents as well as various investors and real estate developers. This trip was quite enlightening for a number of reasons. It gave us the opportunity to understand the way the Indian real estate consumer thinks, and it also shed some light on the types of properties and transactions that appeal to Indian consumers in Silicon Valley.
The Indian Real Estate Market
There were several interesting characteristics of the real estate market in each of the cities that we visited. First, the most affluent and desired parts of the cities tended to be up in the hills. Interestingly, even the most affluent of areas were still plagued by a significant amount of road noise due to the volume of traffic and the tendency of cautionary use of car horns.
In India, the property tax system has traditionally been based on the purchase price of real estate as reported to the government. Thus, it is very common for housing resales to include an official component, which is reported to the state, and under the table portion, which is not reported, which results in a tax savings. Commonly, this split pricing is referred to as “black money” and “white money.”
Another surprising factor from meeting with the real estate professionals in India was the cost of borrowing funds. Generally, the mortgage rates in India are around 10.5%, which is almost triple of what they are in the United States.
Indian Buyers in Silicon Valley
When we analyzed our sales over the last couple of years, we noticed that a significant number of properties located up in the hills of the Silicon Valley have been sold to Indian families. Upon further reflection, we also notice that a number of the homes, which were purchased by Indian families, had more road noise than other homes. From visiting India, we now understand that some cultural influences may be at play in that the amount of road noise encountered may be less objectionable given the amount of noise back in India.
Vastu Shastra is an ancient India doctrine on how the laws of nature affect homes. Vastu Shastra originally focused on the sacred architecture of Hindu temples, and it has now evolved to apply to homes and dwellings. Most of its designs are based on directional alignments and balance of the home, including lighting, positioning, and angle of the home.
For example, under Vastu Shastra, an ideal position for your fireplace or kitchen is the south-east corner of the home. For good health, strong finances, and familial happiness, Vastu Shastra recommends that every room include a spotlight or lantern with the light pointing towards the ceiling. Electricals, such as the television, refrigerator, computer, and microwave, should be placed in the south-east corners.
As always, cultural awareness can help in the marketing of various properties, but it certainly would be foolhardy for someone to think that any ethnic group is going to act in unison. Rather, it is extremely helpful to understand what potential buyers experience to best prepare and market a property effectively and successfully in Silicon Valley.