The Indian real estate sector has emerged as the blue-eyed boy for the institutional investors in 2018. The Indian realty was one of the favored investment destination for institutional investors over the last decade, with significantly increased focus in the second half.
The Indian real estate sector attracted $30 billion of institutional investments between 2008 and 2018, while over $20 billion was invested during 2014-2018 alone, as per this report by JLL India. The increase in the investment is being deemed as the positive impact of reforms by the government. Here are some of the key policy decisions, which have resulted in the change in global investors’ perception of Indian real estate:
- Real Estate (Regulation and Development) Act, 2016 (RERA),
- Benami Transactions (Prohibition) Amendment Act 2016,
- Infrastructure status to affordable housing projects,
- Demonetization,
- Interest subvention schemes,
- Relaxation of norms to encourage Real Estate Investment Trust (REIT) listings,
- Implantation of the Goods and Services Tax.
With the year 2018 coming to an end, institutional Investments in the Indian property sector this year is expected to touch $5.5 billion. And that will make it the decade’s highest level of investment since 2009. As of October end, the sector has recorded investments worth $4.2 billion.
Among different types of institutional investors, it is the private equity investors who have contributed the most, almost 80% of the overall institutional investment in the last decade. Importantly, there has been an increased share of foreign investments of 70% in 2018 as against 31% in 2009 indicating improved confidence of global investors.
Inside the real estate sector, it is the commercial real estate segment that has emerged as the most favorable asset class for institutional investors. There has been a whopping fivefold increase in capital flows to $8.2 billion in 2014-18 from $1.6 billion in the preceding five year period starting 2009.
Some of the global investors like CPPIB, Blackstone Group, Singapore’s sovereign fund GIC, Goldman Sachs and Qatar Investment Authority have been actively investing in the Indian real estate sector over the last decade.
In the near future too, more such funds are eyeing investment and alliance opportunities. Like, private equity major Warburg Pincus is poised to enter into an alliance with the developer Runwal Group to invest $1 billion in retail-led mixed-use development across the country.
Some of the areas which are likely to see the increased institutional investment in the coming years are affordable housing, retail, industrial and warehousing sectors.