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Indian Real Estate Market

Why Indian real estate?

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Market Opportunity

 

 

Indian real estate market is expected to reach $1 trillion by 2030, becoming the 3rd largest in the world.

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Regulatory Framework

 
 
Real Estate (Regulation and Development) Act 2016, RERA, is a landmark change in regulation bringing about consolidation, quality, and transparency, making it an ideal time to enter the market.
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Attractve Risk / Return Profile

 

 

Investing directly in real estate projects alongside reputed developers and indirectly in listed equities, enables a weighted average return commensurate to the risk/return profile.

 

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Increasing Investment

 

 

Increase in transparency and returns have seen a surge in private investments in the sector, attracting institutional investments worth $14 billion between 2015-2019.

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Robust Demand

 



Growing economy has given a push to demand for office spaces and commercial properties.


Growth drivers

Urbanisation

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  • India’s urban population is expected to reach 543 million by 2025.
  • Every year, 10 million people migrate to urban cities.
  • Shift from an agrarian economy to an industrial/service economy is underpinning urbanisation.
  • Rising income and employment opportunities have led to more urbanisation and more affordability for real estate in cities.

High Growth Economy

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  • The Indian economy has grown to become the 5th largest economy with a GDP of 2.86 tn in 2019 from the 12th largest economy with a GDP of 1.34 tn in 2009.
  • Increasing purchasing power parity of the country from $13.36 in 2009 to $21.10 in 2019.
  • With a population growing by 25 million people born every year (the population of Australia) contributing to a middle class of 570 million (2021).

Policy Support

  • Progressive and structural policy changes through acts of parliament
  • One of the first countries to regulate real estate through RERA (Real Estate (Regulation and Development) Act 2016)
  • Relaxation of FDI norms to allow 100% ownership.
  • “Housing For All 2022” scheme to promote affordable housing through tax incentives for the developer.
  • Regulator driven progressive framework for Real Estate Investment Trusts (REITs)
  • India ranked 34th in real estate transparency index (from 39th  in 2015)

Easier Financing Access

  • Economic growth is increasing the household income, especially for middle and low income class.
  • In addition, the government has launched schemes to make credit access easier and tackle the lack of affordable housing.
  • The Credit Linked Subsidy Scheme (CLSS) to make available affordable credit for low-cost housing buyers.
  • The Beneficiary-Led Construction (BLC) offers a central assistance of INR 0.15 million per family for new structure or extension of existing units.
  • The Primary Lending Institutions (PLIs) credits interest subsidy credited straight to the borrower’s account thus reducing the overall burden of the housing loan.

Commercial Property Demand

Commercial Property Demand
  • Office market is being driven by growth in ITeS/IT, BFSI, consulting and manufacturing industries.
  • Grade-A office space absorption is expected to cross 700 million sq f by 2022, with Delhi-NCR contributing the most to this demand.
  • Business activity is shifting from CBDs to SBDs and Tier I to Tier II cities increasing the demand in Tier II cities
  • Co-working space across top seven cities reached 12 msf by end of 2019.

 

Growing Hospitality Sector

Residential Property Supply
  • Rapid urbanisation, growth in population, rise in disposable income and easier access to finance has increased the demand for residential properties.
  • Housing loans account for more than half of retail loans.
  • In February 2018, National Urban Housing Fund (NUHF) was approved with an outlay of 60,000 crores (US$ 9.27 billion).
  • Developers are now focussing on affordable and mid-range categories to meet the huge demand.
Sources: IBEF

Many opportunities in all asset classes

Residential

  • National Capital Region (NCR) is expected to generate maximum demand in middle income group (MIG) and high income group (HIG)
  • Developers are focusing on affordable and mid segment to cater to high demand
Opportunity: Shortage of 110 million units by 2022 according the Government initiative “Housing For All by 2022”.

Commercial

  • India’s commercial space absorption hit a new high of 69.4 million sq ft in 2019.
  • Business activity is shifting from Central Business Districts (CBDs) to Suburb Business Districts (SBDs), Tier 1 to Tier 2 cities
Opportunity: Office space leasing in the top eight cities is expected to cross 100 million square feet between 2018-20

Retail

  • The number of malls was 188 in 2012 against 246 in 2017
  • Private equity investments in the Indian retail assets increased by 15% in 2017 to reach US$800 million

Opportunity: India’s retail market is expected to increase by 60 per cent to reach $1.7 trillion by 2026

Hospitality

  • The first Indian REIT was introduced in 2019 and as of July 2020, it outperformed the Realty Index.
  • The Indian stock market is highly volatile but yields higher returns in the long run.

Opportunity: Listed equities have high short-term volatility but achieve better returns over the medium to long term.