Belt and Road – The Real Estate Angle

The 2nd Belt and Road Summit in Hong Kong took place yesterday (11th Sep), with the attendance of over 3,200 delegates from around the world all eager to learn more about the role each can play and the outbound and inbound investment opportunities for their respective countries and sectors.

Shaman Chellaram

Shaman Chellaram with CRECCHKI – Belt & Road Summit Hong Kong 2017

Many of you may have heard the term Belt and Road, but some may still not be clear on what it is really about.  Essentially “Belt and Road” is a policy-driven initiative by China’s President Xi Jinping.  It looks to connect over 60+ countries along the old Silk Road and further field by stimulating investment in infrastructure, water, power, logistics, real estate and technology into these markets, with an ultimate goal of connecting people.  While ASEAN has had a similar ongoing initiative, Belt and Road has acted as further stimulus for investment focus and provides and platform / framework to move forward.  With this in mind, many of China’s SOEs (State Owned Enterprises) and some private companies have embarked on major road, rail and port infrastructure projects across the ‘Belt and Road’ whether in ASEAN countries, Africa, Eastern Europe or beyond.

The Summit, organised by the HK TDC, was largely about Hong Kong’s role in connecting businesses, Governments, investors with public and private opportunities.  So what does all of this mean for real estate investors?

Ultimately, with the ASEAN region growing fast and as other ‘Belt and Road’ markets open up we will see the need for housing, education, logistics, offices, hotels, retail (online and offline) growing.  All of this represents opportunities for real estate investors, hoteliers and developers, depending on which end of the risk curve you want to be at, and whether you are a long term or short term investor.  There is no doubt that if you follow where the infrastructure will be built, other real estate needs will follow.  If you look at the key  cities and resort areas in these markets other opportunities will become apparent.   A few key take-away messages for our investors:

1) Not all markets are equal – especially in the ASEAN region. Take your time to get to know each country of interest whether it be Indonesia, Myanmar, Philippines, Thailand, Cambodia, Laos or others.  Learn about the people, the culture, their needs and your WHY for entering a particular market.

2) Conduct your own risk assessment of the markets (political, economic, currency, infrastructure, transparency etc) and spend time on the ground.

3) Find a GOOD local development / contractor partner (This cannot be stressed enough!)

4) Be prepared to take the knocks along the way and be patient.

5) Aim to do a project which really adds value to society, the country, and creates local jobs, as well as being financially viable and sustainable.

6) Become a friend of the nation and the people, rather than muscling your way in. PPP – Public / Private Partnerships may be the way to go for some opportunities, while others will be purely private.

Another element for Belt and Road is that it in itself may be become a virtual economy in its own right in the longer term.  With this regard, online retailers will be eyeing this space, as while this is a tech play, infrastructure and logistics investment is of high importance for the delivery of goods.

For any of international clients or investors looking at the ASEAN markets, you are welcome to reach out to me at Evantis Group (www.evantisgroup.com).

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