Indian Real Estate – A port of opportunities for Investors
The real estate sector has been one of the most recognized sectors in the world. In India, It is the second largest employer after agriculture and is considered to be growing at 30 per cent over the next decade. The real estate sector in India comprises of four sub sectors – housing, retail, hospitality, and commercial. The growth of this sector is well matched by the growth of the corporate environment and the demand for office space as well as urban and semi-urban accommodations.
It is also expected that this sector will incur more foreign investments in both the short term and the long term. Bengaluru is expected to be the most favourite property investment destination for the foreign investors, followed by Delhi, Ahmedabad, Pune, Chennai, Goa, and Dehradun
As per some of the global economic forums, India’s rank in the Global House Price Index has jumped 13 spots to reach the ninth position among 55 international markets, on the back of increasing prices in mainstream residential sector.
According to an international report, the Indian real estate market is expected to touch US$ 180 billion by 2020. Housing sector is expected to contribute the most in it. Retail, hospitality and commercial real estate are also growing significantly, providing the much-needed infrastructure for India’s growing needs.
New housing launches across top cities in India have increased drastically year-on-year. India is expected to witness a rise in the number of real estate deals in 2019-20, on the back of policy changes that have made the market more transparent.
Sectors such as IT and ITeS, retail, consulting and e-commerce have registered high demand for office space in recent times. Private equity inflows in office and IT/ITES real estate have grown significantly backed by a strong attraction towards office sector.
The Indian real estate sector has witnessed high growth in recent times with the rise in demand for office as well as residential spaces. According to data released by Department of Industrial Policy and Promotion (DIPP), the construction development sector in India has received Foreign Direct Investment (FDI) equity inflows to the tune of US$ 24.67 billion in the period April 2000-December 2017.
Some of the major acquisitions in this sector recently:
In May 2018, Blackstone Group acquired One Indiabulls in Chennai from Indiabulls Real Estate for around Rs 900 crore (US$ 136.9 million).
In February 2018, DLF bought 11.76 acres of land for Rs 15 billion (US$ 231.7 million) for its expansion in Gurugram, Haryana.
In February 2018, Japanese conglomerate Sumitomo Corporation announced its US$ 2 billion partnership with Krishna Group to develop real estate projects in the country.
KKR India Asset Finance Pvt Ltd has invested over US$ 500 million in residential real estate projects in India in 2017, taking its total investments in real estate projects in India to US$ 1 billion.
Some of the global players such as RE/MAX has also advanced their presence in India. Recently, they opened their seventh broker office in Chennai.
The Government of India along with the governments of the respective states has taken several initiatives to encourage the development in the sector. The Smart City Project, where there is a plan to build 100 smart cities, is a prime opportunity for the real estate companies. Apart from this, following major initiatives have also been taken by the Government of India:
In May 2018, construction of additional 150,000 affordable houses was sanctioned under Pradhan Mantri Awas Yojana (PMAY), Urban.
In February 2018, creation of National Urban Housing Fund was approved with an outlay of INR 60,000 crore (US$ 9.27 billion).
Under the Pradhan Mantri Awas Yojana (PMAY) Urban 1,427,486 houses have been sanctioned in 2017-18.
The approval given by Securities and Exchange Board of India (SEBI) for the Real Estate Investment Trust (REIT) platform will help in allowing all kinds of investors to invest in the Indian real estate market. It would create a huge opportunity in the Indian market over the years. Responding to an increasingly well-informed consumer base and, bearing in mind the aspect of globalisation, Indian real estate developers have shifted gears and accepted fresh challenges. The most marked change has been the shift from family owned businesses to that of professionally managed ones. Real estate developers, in meeting the growing need for managing multiple projects across cities, are also investing in centralised processes to source material and organise manpower and hiring qualified professionals in areas like project management, architecture and engineering.
The growing flow of FDI into Indian real estate is encouraging increased transparency. Developers, in order to attract funding, have revamped their accounting and management systems to meet due diligence standards.
To conclude, the stage is all set today, all has to be done is by the investment companies to find out the best opportunity and make a bet for a profitable tomorrow.
By: Gaurav Marya, Managing Director of RE/MAX India