Bad days of Indian real estate sector seem to be finally over. A recent report states that the realty market is poised to grow at the rate of 30% over the next decade and will touch US$ 180 billion by 2020.
Owing to the new regulatory environment that is being created with the implementation of several disruptive policies like Real Estate (Regulation and Development) Act, 2016 (RERA), Goods and Services Tax (GST), Real Estate Investment Trusts (REITs), the Benami Transactions (Prohibition) Amendment Act, 2016, a higher level of transparency accountability and financial discipline is now seen in the industry.
To further accelerate the growth is the Central Government’s reformative steps like the Pradhan Mantri Awas Yojana (PMAY), which is working as a key agent at making the residential asset class more attractive for large investors. As per a recent ANAROCK report, the ‘Housing for All by 2022’ initiative alone is likely to bring US$ 1.3 trillion investments into the residential sector by 2025.
“Overall, it has been a rather messy maturing process for the Indian real estate, but it is largely so because there are decades of incredibly messy business practices to be cleaned,” Anuj Puri, Chairman – ANAROCK Property Consultants wrote in APN News. “Judging by the levels of pain and consolidation the process has induced in the sector, it is doubtlessly effective – and we may yet see ‘Acche Din’ in the Indian real estate sector.”
As for PE investments in Indian real estate, the first quarter numbers of 2018 looked positive with the overall PE funding increasing by 15-17% from a year ago, as per the report. However, it is the commercial office real estate sector that has seen most institutional investments recently.
As per the report, Grade A office projects, IT parks, and even logistics centers are currently yielding the levels of returns on investment that previously made the residential asset class so attractive to investors. Also, the average investment per deal, particularly in the commercial real estate, has increased by almost 3-4 times to nearly the average investment per deal 6-7 years back.
The report also talks about the rise in the trend of mergers, acquisitions, and JDs in the Indian real estate sector. Some of the top deals in H1 2018 alone are worth over $1.5 billion, which comprise of investors like Blackstone, Canada Pension Plan, Ascendas, GIC and India-based HDFC venture investing in Phoenix Group, Godrej Properties, and ATS Group.