Rising Investment Opportunities In India

In 2020, India presents a global investment opportunity in the real estate sector. The government has been proactive and with a spate of structured reforms, has been able to bring more transparency and trust to the real estate sector. Today, it is a promising sector.

Sanjay Dutt, MD & CEO, Tata Realty & Infrastructure Ltd

Reforms like Demonetization, Goods and Services Tax (GST), implementation of Real Estate Regulatory Authority (RERA), a push to affordable housing, the Benami Transactions Act, the Real Estate Investment Trusts (REITs), the tax efficient PMAY scheme, Infrastructure Investment Trust (InvIT), and Government’s Infrastructure funding have led to critical growth and development within the infrastructural, residential and commercial areas.

These accompanied by the fact that the country has moved up the ranks to the 63rd position on the World Bank’s scale of countries, in terms of Ease of Doing Business for 2019, has made Indian real estate an investment-friendly destination. The high growth sector has already enticed global majors and coupled with the negative interest rate environment in several developed countries, there is a potential for doubling of FDI investments.

The policy reforms have also brought in a significant improvement in the transparency, corporate governance and credibility of the sector in India. Real Estate investment in India is now safe within the legal framework and jurisdiction focused on customer rights. With customer rights better safeguarded, a significant improvement in demand is expected from end-use customers and NRI investors alike for the next decade. Accountability has also been welded into the system and is now quite similar to the developed countries specially in respect of the rights and obligations of each stakeholder.

Post the Bank NPA & linked NBFC crisis the RBI led reduction in interest rates will get further transmitted to end customers in 2020 due to liquidity in the banking system.

The expectation of double-digit CAGR growth by the Real estate sector in India is a reasonable proposition. The sector is expected to grow exponentially from US$ 120 billion in 2017 to a whopping market size of US$ 1 trillion by 2030 to meet the aspirations of a youthful nation. The sector alone is projected to contribute 13 per cent of the country’s GDP by 2025.

The high growth in allied sectors of retail, hospitality, commercial real estate and logistics make the real estate sector more sustainable for decades. These sectors too are growing significantly, providing the much-needed infrastructure for India's growing needs and aspirations which now match global standards.

The positive business atmosphere with a ‘we can’ attitude has also propelled the Real estate markets, which are poised to benefit not only from the government’s policy push towards reforms but also speedy completion of several infrastructure projects. Both private, as well as public sector enterprises today, are riding into the future with newfound enthusiasm and confidence.

 

India, being for the 2nd largest nation, had issues regarding development for its masses. Affordable housing has been high on priority and helped by government incentives. Affordable housing can give high teen returns  to investors in this market segment . There are also a number of alternative residential real estate investment options, including Serviced Apartments, Senior Living, Smart City-based housing, Co-living, and SOHO(small office, home office) which are gaining acceptance and momentum in the burgeoning Indian society.

The changes have attracted not just domestic investors but the international investors too to the real estate sector. According to data released by Department of Industrial Policy and Promotion (DIPP), the construction development sector in India has received Foreign Direct Investment (FDI) equity inflows to the tune of US$ 25.04 billion in the period April 2000- March 2019.

Private equity firms have always been keenly interested in Indian real estate, and they continue to be invested in the sector with their investment in the sector during the first three quarters of 2019 rising to US$ 5.45 billion, a good 19% up from same period last year.

For the quarter ended September 2019, private equity investment stood at US$ 1.39 bn (Cushman & Wakefield India).

The office segment remained the favored investment asset class with the expectation of further traction in the near term. Institutional interest in rent- yielding office assets continued to be backed by strong occupier demand with 2019 slated to surpass 2018’s leasing numbers for a new historical peak.

The investment idea in the realty sector and construction has everything going perfect for it, presenting minimum risks and promising attractive returns in a short, medium and long term period. The recent oversubscription of the Embassy-Blackstone REIT in the beginning of the year, definitely sends out a clear signal to global as well as domestic investors – it’s a good time to invest in the Indian office property segment.

Driven by tech companies and the rise of co-working spaces, the demand for office spaces is bound to expand further to reach historical levels by the end of this year. The demand in the office market is expected to grow at a similar momentum in the next decade and is expected to reach 1 billion ft from the current 600 sqft.

This decade will be a solid, sustainable, profitable and value assertive one, for the whole real estate sector.

About the author

Mr. Sanjay Dutt

MD & CEO

Tata Realty & Infrastructure Ltd

Mr. Sanjay Dutt has over 26 years of real estate experience. Known for his turnaround stints, Mr. Dutt has spent 20 years in the real estate consulting and 4 years in the real estate development.

He is currently the MD & CEO of Tata Realty & Infrastructure Ltd and managing 53 projects measuring over 70 million sft, besides 3 rope ways, 4 road ways & a Metro Project spread across 15 cities in India, Sri Lanka & Maldives.

Prior to Tata, Mr. Dutt was the CEO of Ascendas-Singbridge’s India operation where he successfully negotiated and incubated 1700 acres of start- up capital project with the Government of Andhra Pradesh besides adding 10 million sft of new commercial space and kicked off redevelopment of 4 million sft. in Hyderabad & Bengaluru.

He also has 2 successful stints at Cushman & Wakefield under his name that also saw successful merger & integration of DTZ & C&W. Earlier in his career, he was the CEO Business with JLL and was one of the founding members of CBRE in India.

Mr Sanjay Dutt was recently appointed as Chairman of RICS. He is also the Chairman of FICCI (Real Estate Committee), an Advisory Council member of GRI & GBCI, and member of CoreNet Global. He is also a member on the Governing Council of Naredco.

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