Commercial Space, Industrial, Residential

Affordable Housing, Commercial Assets and Industrial Sectors Offer RE Investment Options in India

PE INVESTORS VALIDATE THE INDIAN RE GROWTH STORY BY PUMPING IN USD 2.6 BILLION

Institutional investors are expected to pump in higher funds into India’s affordable housing, industrial and commercial assets in 2018, led by progressive policy reforms in the world’s fastest growing economy. The expected inflows during 2018 will add to an already solid start to the year, wherein Q12018 recorded inflows of USD 2.6 billion into the Indian real estate (RE) sector. During the first quarter, private equity in real estate (PERE) eclipsed the inflows of the first quarter of the previous 11 years, with inflows in the residential sector highest in 10 quarters. The rising interest of institutional investors is testimony to the attractiveness of the Indian real estate market.

Opportunity in Affordable Housing

This year, we foresee higher activity from institutional investors in the affordable housing segment. The segment poses a huge opportunity to investors and developers, led by massive unmet demand for homes. Moreover, the government has provided initiatives to developers to create affordable housing stock and increased transparency in the sector through:

  • Housing For All by 2022 project
  • Real Estate Regulatory Authority (RERA) Act

Private equity inflows into the residential sector more than doubled (Y-O-Y) to INR 85.18 billion (USD 1.32 billion), backed by a large platform transaction between Housing Development Financial Corporation (HDFC) and Abu Dhabi Investment Authority (ADIA). Mumbai accounted for approximately 19% of the total deals in the residential sector.

Indian real estate investment

What’s Ahead for Office, Industrial and Warehousing Sectors

Office Outlook

  • Compression in yields going ahead as capital values is on the rise.
  • The sector will continue to attract heightened interest from foreign investors who are building up a portfolio of rent-yielding assets, and thereby altering the ownership pattern (between developers and private equity investors) of office stock in major cities.

Industrial and Warehousing Outlook

We foresee the Industrial and Warehousing sector winning the interest of private equity investors in 2018 as the Goods and Services Tax (GST) has paved the way for a simplified and uniform taxation policy, which will improve efficiencies in the supply chain management.

Retail developments in Tier-II cities have also been attracting attention of investors due to the investment prospects in these cities backed by demand for space by retailers amidst lack of quality retail spaces.

So, what does the Indian RE investment landscape look like in 2018? We expect the investment momentum to continue rising in 2018, backed by strong economic fundamentals and bold and progressive policy reforms. We also anticipate that office, industrial and warehousing, and affordable housing sectors will garner a greater share of institutional investments.

Read the full data and outlook on the Indian real estate market for Q1 2018 here.

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