How Recent Investments Lead to High Growth Rate in Indian Real Estate Sector

In recent times, the Indian real estate sector has gained high growth due to the rise in demand for office and residential spaces. It has attracted over U$ 5 billion of institutional investments in 2020, which is equal to 93% of transactions collected last year. These investments came from private equity (PE) players and VC funds and thus reaching a whopping US$ 4.06 billion in 2020. The private equity investment worth Rs. 23,946 crore (US$ 3,241 million) across 19 deals are done in the Indian real estate market in Q4 FY21. These investments grew 16x compared to Rs. 1,470 crore (US$ 199 million) in Q4 FY20. According to Knight Frank, these investments were more than 80% and 48% of the year 2020 and 2019 respectively.

Exports from SEZs of Rs. 7.96 lakh crore (US$ 113.0 billion) done in FY20 is a factor for the investments which grew ~13.6% from Rs. 7.1 lakh crore (US$ 100.3 billion) in FY19.

According to the Department for Promotion of Industry and Internal Trade Policy (DPIIT), it found the construction to be the third-largest sector in terms of FDI inflow. FDI in the sector (including construction development & activities) stood at US$ 50.8 billion between April 2000 and March 2021.

 Some of the major investments and developments in this sector are as follows:

• According to JLL India, Noida represented 55% of the net increase, followed by Gurgaon at 38% in January-March 2021 quarter,
• According to a JLL report, Delhi-NCR saw a 5% net expansion in investment of office space in the primary quarter of FY20 on a QoQ basis with 1.07 million sq. ft.
• India’s adaptable space stock is probably going to extend by 10-15% YoY, from the current 36 million sq. ft., in the following three years, as per a report by CBRE.
• In the main seven urban Indian Cities, housing deals increase by 29% and new project launches by 51% in the final quarter of FY21. Delhi-NCR, Mumbai, Bengaluru and Pune together represented 83% of deals in a similar quarter.
• The micro-sectors in the Delhi-NCR area, including Noida and Gurgaon, posted a twofold digit extension in property appreciation costs with 11% and 13% growth respectively.
• To build up a venture stage for the Indian retail mixed-use assets, in June 2021, GIC declared to get a minority stake in Phoenix Mills’ portfolio (worth US$ 733 million).
• In May 2021, Blackstone Real Estate acquired Embassy Industrial Parks for Rs. 5,250 crores (US$ 716.49 million) to expand its presence in the country.
• To expand into the Indian real estate market, SRAM & MRAM Group collaborated with Area CAS Developers and Infrastructure Private Limited (Area Group), and Gupta Builders and Promoters Private Limited (GBP Group) of India. It plans to invest US$ 100 million in the real estate sector.
• Housing demand and sales in seven cities increased by 29% and new launches by 51% in Q4 FY21 over Q4 FY20, a report by Anarock.
• Demand for residential real estate revived in Q4 FY21 as homebuyers took advantage of low mortgage rates and incentives rendered by developers. Residential sales in this quarter recovered to >90% volumes recorded in 2020 across the top seven cities.
• Blackstone being India’s biggest private market financial investors overseeing about Rs. 3,694 crore (US$ 50 billion) of market presence in the real estate market. The organization expects contributing >Rs. 1,625 crore (US$ 22 billion) in the following 10 years in realty bid.
• In 2021, work from home is becoming the norm reasonable houses with price underneath Rs. 40-50 lakh is relied upon to ascend in Tier 2 and 3 urban areas, prompting an increase in the costs.
• In April 2021, HDFC Capital Advisors (HDFC Capital) cooperated with Cerberus Capital Management (Cerberus) to make a platform that will zero in on high return in the private real estate sector in India. The platform will purchase inventory and give financing support to under development private projects all over the nation.
• In March 2021, Godrej Properties reported it would launch 10 new land projects in Q4.
• In March 2021, Godrej Properties expanded its value stake in Godrej Realty from 51% to 100% by securing value shares from HDFC Venture Trustee Company.
• In January 2021, SOBHA Limited’s completely possessed auxiliary, Sabha Highrise Ventures Pvt. Ltd. gained a 100% share in Annalakshmi Land Developers Pvt. Ltd.
• In November 2020, Accor, a leading hospitality group, to launch seven new properties in India by 2022.
• In November 2020, Prestige Estates Projects Ltd. sold a huge assortment of office, retail and lodging properties to Blackstone for Rs. 12,745 crores (US$ 1.7 billion).
• In November 2020, Taj Group collaborated with land organization Ambuja Neotia Group to build up three new hotel projects—two in Kolkata and one in Patna.
• The Godrej Group has forayed into the monetary services industry with Godrej Housing Finance (GHF) through which it desires to assemble a long haul and supportable retail financial service business in India, focusing on an accounting report of Rs. 10,000 crore (US$ 1.35 billion) in the following three years.
• In October 2020, Brookfield Asset Management made monstrous interests in India through a US$ 2 billion land bargain. Brookfield will purchase 12.5 million square feet of business land resources from privately held engineer RMZ Corp. The purchase incorporates rent yielding office space and business co-working space.
• In October 2020, Rajasthan-based realty designer, Bhumika Group, hinted at contributing Rs. 450 crore (US$ 60.81 million) in two residential and one retail project in Udaipur, Alwar and Jaipur, individually.
• In October 2020, Australia’s REA Group Ltd. reported to procure a controlling interest in Elara Technologies Pte. Ltd, the proprietor of Housing.com, PropTiger.com and Makaan.com.
• In September 2020, RMZ Corp. sold 12.8 million square feet of land resources for an asset oversaw by the Brookfield Asset Management for Rs. 15,000 (US$ 2 billion).
• As per the property advisor, Anarock, India is probably going to have 100 new shopping centers by 2022. Of this number, 69 shopping centers will be constructed in the main seven city and the leftover 31 shopping centers will be in Tier 2 and 3 urban areas.
• In March 2020, the Government supported recommendations from TCS and DLF to set up SEZs for the IT area in Haryana and Uttar Pradesh.
• In January 2020, RMZ Corp went into a vital and equivalent association with Mitsui Fudosan (Asia) Pvt Ltd to extend its business impression.

 Government Policies and initiatives

The Indian government and state governments have taken various initiatives to promote the development of this sector. The smart city project plans to build 100 smart cities is looked upon as an excellent opportunity for real estate companies.

Few other important government initiatives: According to the Union budget for 2021-22, tax relief is as high as Rs. 1.5 lakh (US$2,069.89) on housing loan interest and tax allowance for affordable housing projects have been extended to the end of the 2021-22 fiscal year.

The Atmanirbhar Bharat 3.0 package announced by Minister of Finance Smt. Nirmala Sitharaman in November 2020 includes income tax relief measures for real estate developers and homebuyers for the initial purchase/sale of residential units up to Rs. 2 crore (271,450.60 USD) from November 12 to June 30, 2021.

The Ministry of Housing and Urban Affairs (MoHUA) launched a portal for affordable housing rental complexes.

On October 27, 2020, the government announced the implementation of the 2016 Real Estate (Regulation and Development) Law on the territory of the Jammu and Kashmir Union. This paves the way for any Indian citizen to purchase non-agricultural land and property, where previously only local residents were eligible to purchase it.

The government has established an Affordable Housing Fund (AHF) in the National Housing Bank (NHB) with an initial corpus of Rs. 10,000 crore (US$1.43 billion) to use short-term sector priority loans from banks/financial institutions for HFC microfinance.

As of January 31, 2021, India has formally approved 425 special economic zones, of which 265 are already in operation. Most Special Economic Zones (SEZ) are in the IT/BPM field.

 Next Step Ahead 

The Securities and Exchange Commission (SEBI) of India has approved a Real Estate Investment Fund (REIT) platform for all types of investors who can invest in the Indian real estate market. This creates a valuable opportunity for the Indian real estate market. It will be worth $ 1.25 trillion ($ 19.65 billion) over the next few years. In response to an increasingly informed consumer base and in view of the challenges of globalization, real estate developers in India have changed course and encountered new challenges. The most significant change is the move from a family business to a professionally run company. Real estate developers have access to resources to pool a skilled workforce and professionals in areas such as project management, construction and engineering to meet the growing demand for a variety of urban projects, as well as to invest in a centralized hiring process.

As part of the ambitious Pradhan Mantri Awas Yojana (PMAY) program of the Ministry of Housing and Urban Development (PMAY), the central government aims to build 20 million affordable apartments in urban areas across the country by 2022. The increase in the number of residential units in the metropolis is expected to increase the demand for commercial and retail office space.

Currently, the urban housing shortage is estimated at 10 million units. By 2030, an additional 25 million affordable homes will be needed to keep pace with urban population growth.

An increase in foreign direct investment in real estate in India will contribute to greater transparency. Developers are redesigning accounting and management systems to raise funds to meet prudential requirements. Indian real estate is expected to attract significant foreign direct investment over the next two years, with an inflow of $ 8 billion in fiscal year 2022.

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