Major consolidation by way of mergers and acquisitions has become a prominent trend in the sector. Top deals include Blackstone, Canada and Pension Plan.
The real estate sector in the country is showing signs of revival with companies investing over $1.5 billion in the first half of current fiscal 2018-19.
Major consolidation by way of mergers and acquisitions has become a prominent trend in the sector. Some of the top deals comprise of investors like Blackstone, Canada Pension Plan, Ascendas, GIC and India-based HDFC Venture (see chart), according to a study conducted by property consultant firm Anarock.
An official from the firm said this new hope has been created with the implementation of several progressive policies of the Centre like the Real Estate (Regulation and Development) Act (RERA), Goods and Services Tax (GST), Real Estate Investment Trusts (REITs), Benami Transactions (Prohibition) Amendment Act and the PM Awas Yojana.
These policies, he said, are bringing in higher levels of transparency, accountability, financial discipline, focus and efficiency into the sector which could only be dreamt of in the past. “Moreover, these reforms have opened up new avenues for growth. These are more than sufficient indicators to ensure country’s growth story and its positive repercussions on the sector,” he added.
According to Indian Brand Equity Foundation (IBEF) report, the market size of the Indian real estate sector is expected to touch $180 billion by 2020 and is poised to grow at the rate of 30% over the next decade. The report says the number of Indians living in urban areas is slated to increase from 434 million in 2015 to 600 million by 2031. The housing sector alone is expected to contribute around 11% to India’s GDP by 2020.
“The increasing share of real estate in the country’s GDP will be supported by increased industrial activities, improving income levels and rapid urbanisation across cities. In terms of FDI equity inflows, real estate is the fourth largest sector in the country. The total FDI inflows in the sector were $24.67 billion between April 2000 and December 2017, which is 7% of the total FDI equity coming into the country during this period,” the report says.
“The sector witnessing most institutional investments at present is the commercial office real estate. Driven by rapid employment generation and the near possibility of the first REIT listings, Grade A office projects, IT parks and even logistics centres are currently yielding the levels of returns on investment which previously made the residential asset class so attractive to investors,” said Anarock chairman Anuj Puri.
India needs investments to the tune of $4 trillion over next 5-6 years to implement various government schemes. The “Housing for all by 2022” initiative alone is likely to bring in $1.3 trillion investments into the residential sector by 2025. In this environment, institutional financing is gaining prominence.
Figures suggest that average investment per deal, particularly in commercial real estate, has increased by almost 3-4 times compared to 6-7 years ago. The rise of institutional investors will significantly improve levels the real estate sector and make it more structured and transparent, said a company official.