Recently, real estate has been one of the buzzing sectors of our country. The Modi government has shown some serious attention towards this sector. The Housing for all by 2022 has been one of the most promising statements from the prime minister. Real estate has been through a rough phase in 2017 and is currently reviving. Demonetization, RERA & GST has impacted the sector heavily. The major trends of 2018 are:
The rise of affordable housing - Ashish Bhalla
Affordable housing in India is finally set to get the much-coveted infrastructure status. One crore houses are to be built in rural India by 2019, and this vital segment will now see cheaper sources of finance – including external commercial borrowings (ECBs). Re-financing of housing loans by National Housing Banks (NHBs) can give a further boost to the sector. A new Credit Linked Subsidy Scheme (CLSS) for the mid-income group with a provision of INR 1,000 crore in 2017-18 was announced even before Budget 2017-18. Extension of tenure of loans under the CLSS of Pradhan Mantri Awas Yojana (PMAY) was increased from 15 to 20 years, and the Budget also increased allocation to PMAY from INR 15,000 crore to INR 23,000 crore in the rural areas.
Office sector transformation: From REIT to complete - Ashish Bhalla
The first REIT listing is expected within the next few months, and prominent private equity funds such as Blackstone will likely be the first movers. REITs will attract institutional and smaller investors alike because of their inherent nature to provide regular dividends at relatively low risk. Smaller investors are especially excited at this new and easier investment opportunity because:
Indian REITs will prefer to invest in commercial space developments – specifically the highest quality or Grade-A properties – because of the higher rental yields in this asset class; and
Only 20% of an Indian REIT’s monies can be invested in development, which is the riskiest aspect. The remaining 80% of a REIT’s assets must be invested in income-producing property.
Global capital flow into Indian real estate - Ashish Bhalla
India ranked fourth in developing Asia for FDI inflows as per the World Investment Report 2016 by the United Nations Conference for Trade and Development. That is endorsement at the highest levels – and real estate saw equity investment on a very visible return journey to India last year. Indian real estate has attracted USD ~32 billion in private equity so far. The global capital flow into Indian real estate in 2016 stood at USD ~5.7 billion. Though the historic high of 2007 (in terms of total PE inflows) was not breached, last year proved to be the second-best year so far. Despite Brexit and uncertainty around the new US President’s outsourcing and visa-related policies, private equity activity also looks healthy in 2017 – thanks to a strengthening and modernizing economy, and the growing reputation of India as an attractive investment destination. India’s tier I cities moved up to the 36th rank in JLL’s 2016 bi-annual Global Real Estate Transparency Index. The catalyzing factors for this were improvements in structural reforms and the more liberalized foreign direct investment (FDI) regime. Increased transparency brings higher investments into such real estate markets.
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