The Indian property market has emerged as the preferred destination for the domestic and foreign institutional investors in 2018. The real estate sector has recorded investments worth $4.2 billion (about Rs 29,413 crore) till October end and it is expected that figure may touch $5.5 billion(around Rs 38,527 crore), the decade’s highest level of investment since 2009.
Post the global financial crisis, the real estate sector attracted $30 billion of institutional investments between 2008 and 2018 and over $20 billion was invested during 2014-2018, driven by the various policy reforms taken by the Indian government. Here are the following major regulatory reforms, which has changed the perception of the Indian real estate sector among the global investors
- Demonetization
- Real Estate (Regulation and Development) Act, 2016 (RERA)
- Benami Transactions (Prohibition) Amendment Act 2016
- Infrastructure status to affordable housing projects
- Relaxation of norms relaxation of norms to encourage Real Estate Investment Trust (REIT) listings
- Establishment of the Goods and Services Tax(GST).
There are different types of institutional investments which includes pension funds, private equity, family offices, foreign banks' real estate investment desks, sovereign wealth funds, real estate investor-cum-developer, and foreign corporate groups whereas lending by banks, Non-banking Financial Companies (NBFCs) and Housing Finance Companies (HFCs) is not included in institutional investments. Among various types of institutional investors, private equity investors are the ones who have contributed the most, which is almost 80% of the total institutional investment in the last decade.
Importantly, the global investors have gained confidence on the Indian real estate market which is clearly evident with an increased share of foreign investments of 70% in 2018 as against 31% in the year of 2009. In terms of cities, Mumbai has been India’s top destination attracting 42% share of investments worth $8.6 billion in the period 2014-18, followed by other cities such as Delhi NCR and Bengaluru with $4.4 billion and $2.6 billion respectively.
For institutional investors, a commercial segment in the real estate has emerged as the most preferred asset class. A whopping five-fold increase has recorded in capital flows to $8.2 billion during 2014-18 against $1.6 billion in 2009-13. Global investors like CPPIB, Singapore’s sovereign fund GIC, Blackstone Group, Goldman Sachs and Qatar Investment Authority have been investing in the Indian real estate sector for the past few years.
Additionally, more such funds are eyeing investment as well as alliance opportunities in Indian realty market such as a leading global private equity firm, Warburg Pincus is planning to team up with Mumbai developer Runwal Group to invest $1 billion in real estate projects.
There are some areas which are likely to see the growth in institutional investment in the next few years are affordable housing, retail, industrial and warehousing sectors.