In India, there may have been a slowdown in residential demand, but the overall real estate sector continues to attract huge investments, particularly in the commercial real estate market and the affordable housing segment. Investors buoyed by reforms like the implementation of Real Estate Regulations Act (RERA), the government's housing for all initiative and bottlenecks for Real Estate Investments Trusts (REITs) also being removed have been increasing their exposure to the market.
The total investment in the real estate sector topped Rs 16,000 crore in the first six months of 2017, which is highest ever for the first half in any year, data shows.
Between January-June, private equity investors pumped in Rs 16,008 crore in India's realty market. The sector attracted investments worth Rs 15,601 crore in the same period last year, according to real estate consulting firm JLL India.
“Big bang policy reforms, economic and political stability, liberalisation of the FDI policy and the resultant improvement in the investment community's sentiment are some of the factors working in Indian real estate's favour,” said Shobhit Agarwal, managing director―capital markets, JLL India.
Between 2014 to the first half of 2017, the realty sector saw debt and equity investments worth over Rs 98,000 crore. In comparison, Rs 95,000 crore was invested over 2003-2013.
Canadian Pension Plan Investment Board (CPPIB), Brookfield Asset Management, Caisse de Depot et Placement du Quebec, Singapore's sovereign wealth fund GIC and the Blackstone Group among others have been among the top investors in the real estate market here, over the last few years.
Affordable housing projects, new malls and shopping centres, logistics parks, warehouses and prime office space is attracting these investors to India. Through REITs, some of these commercial realty assets could also be monetised in the future, which could also make investments attractive.
On Tuesday, for instance, International Finance Corp announced it would invest over $1 billion in creating green buildings.
In April this year, CPPIB formed a strategic investment platform with The Phoenix Mills to develop its own and operate retail-led mixed use developments across the country. The pension fund will initially have a 30 per cent stake, investing about Rs 725 crore. Overall, it plans to invest Rs 1,600 crore in multiple tranches to raise its stake in the platform to 49 per cent.
Separately, private equity firm KKR & Co recently invested about Rs 1,000 crore in three real estate projects, which included a township project in Bengaluru and an affordable housing project in Gurugram.
“GST, RERA, REITs, the Benami Property Act and constant focus on affordable housing will lead to the sector evolving into a more mature, consolidated and highly transparent industry. This is expected to attract further private equity from abroad,” said JLL's Agarwal.
Real estate consulting firm CBRE has estimated that India's real estate market is expected to see investments worth $7 billion in 2017, which would further increase to $10 billion by 2020.
