Cadim: The China and India Real Estate Market Entry Decisions 2009

Case Analysis

Cadim: The China and India real estate market entry decisions 2009

1. Evaluate India and China as investment destinations for Cadim.

Both India and China are experiencing fast economic growth and they are among the BRICs that are representatives of emerging markets. With their tremendous population and accelerating pace of urbanization, real estate markets of the two countries become fascinating targets of investment. However, real estate investment in a foreign country involves far more elements than market potential. Therefore a panorama of the political, economic background and insight into the real estate markets become essential.

As is shown in Exhibit I enclosed, both India (9.2%) and China (10.7%) have shown strong growth in GDP. In spite of the fact that the household wealth was still not comparable to developed countries, tremendous demand was created along with urbanization (see the enclosed Exhibit II). In comparison with India, China excelled in Investment Liberalization and Facilitation. Though the one-party political pattern harmed democracy, the Chinese situation was favorable for pure business purpose as there are very few interventions after obtaining permission by the country. As the Chinese government was promoting investment and entrepreneurship in various lines of business, protectionism was seldom observed there. China was also enjoying a stably appreciating exchange rate of CNY, reasonable inflation rate, as well as outstanding infrastructure and this also increased the likelihood of success in real estate investment. In contrast, India suffered from inefficient government, conservativeness to foreign investment especially in real estate (investment barrier), out-of-date infrastructure (efficiency hamper), high inflation (uncertainty to real estate price, affordability and cost), together with the fluctuating currency of Rupee (potential risk of investment). Threats to real estate investment in China mainly came from the society, e.g. difference in language and business practice, less reliable legal and judicial system, opaque banking and financial system, slight possibility of social disorder given certain premise. Most of them can be considered minor negatives if handled properly.

3. What decision should the Caisse board make regarding India and China? Please provide a supporting rationale for your response.

Cadim, one out of the three real estate divisions under Caisse, focuses on the residential and hotel markets. A decision needed to be made to decide the destination of investment. Investing in China through a joint venture or merger with local giants, and no investment in India is the solution by team 6 of impact cohort.

The huge current market and enormous potential market in real estate was the foremost reason. China