The Indian real estate industry, which has been quite a conundrum, has started to see investment by foreign investors. At this point, the retail real estate market appears promising despite global concerns and economic uncertainty due to various initiatives and measures introduced by the government to restore confidence in the sector.
After the liquidity crisis in the non-banking financial company (NBFC) space, liquidity in the realty industry has dried up and Indian developers have been exploring debt and equity funding from various PE firms. Responding to an increasingly savvy consumer base and, bearing in mind the globalisation aspect, Indian real estate developers have shifted gears and have explored funding from outside. Singapore invested the maximum, followed by PE players from the US and Canada.
Seeing the potential of the realty sector, the investor-friendly reforms initiated by the government and positive sentiment following India’s first Real Estate Investment Trust (REIT) offering, private equity and venture capital investments in the industry have reached $4.47 billion in 2018 and $249 million in Q1 of 2019.
In the first quarter of 2019, the industry has seen an investment to the tune of $2.5 billion, or Rs 17,682 crore, on strong flows from foreign investors into commercial assets. The central government along with state governments has taken several initiatives to encourage the development of the industry. Increasing transparency and friendly investment policies have improved opportunities in the warehousing and logistics segment, with office and retail industry showing continued traction.
Also the successful REIT (Real Estate Investment Trust) listing has opened up another avenue for investors to participate in the Indian realty story, mainly the office market. Investment in office properties rose to Rs 7,925 crore from Rs 6,100 crore during the January-March quarter of 2019. While the hospitality segment received Rs 3,950 crore, the industrial segment (warehousing and logistics) got Rs 760 crore.
Going forward, a stable government at the centre, transparency in the system and with other initiatives, the industry should see good growth. Retail, hospitality and commercial segments of real estate have been growing considerably, providing the much-needed infrastructure to India's growing needs. Moreover, foreign investors are confident about India’s robust commercial office market and they have preferred India as a destination to park funds after China.
Besides commercial spaces including office and retail, foreign players are also diversifying their portfolios and eyeing sunshine sectors like logistics and warehousing. There are projections that the industry will grow to $650 billion by 2025, cross $850 billion by 2028 and touch $1 trillion by 2030.
