BUOYANT INDIAN REALTY: RISING GLOBAL PE INVESTMENTS
Following the epidemic, the real estate sector has recovered, and worldwide PE investments have aided the recovery. "We've seen about USD 24 billion dollars in FDI investments flow into the country over the last 4-5 years," said Ramesh Nair, CEO, India & Managing Director, Market Development, Asia, Colliers. According to Gaurav Karnik, Real Estate National Leader and Tax Partner, EY India, the industry has seen long-term investors such as pension funds and sovereign wealth funds participate in Indian real estate in past 2-3 years. Diversification of investments is across industrial, warehousing, commercial and residential. Retail has been slightly muted. But, there have been large portfolio deals where people have picked up commercial and retail mixed use developments.” Harsh Vardhan Patodia, CMD, Unimark Group & National President CREDAI, remarked. Prices of all consumable materials have increased and real estate input costs have increased by more than 40% overall. A lot of projects could suffer in terms of profitability and even execution capabilities. This may have a significant influence on the investment scenario going forward. Ambar Maheshwari, CEO of Indiabulls Asset Management stated, “Not just the last two years of the pandemic, the residential margins had been going down even before the pandemic. Because of various factors like Demonetization, GST, RERA and so forth, the demand took a big hit because of which the pricing was stagnant and with rising input costs, the developers are facing even more challenging times.” Sushil Mohta, Chairman, Merlin Group, President, Credai, West Bengal expressed, “Residential real estate demand will always be there in India. The problem is there's mismatch of the product and the pricing. We have to see that the cost can come down and prices can become affordable for the buyers. This requires serious government intervention.” Rajat Garg, Director of Investments, ESR India speaking about investments in warehousing sector said, “There's been a surge of interest from across the board for investing in Warehousing due to demand from E-commerce and manufacturing sector like Pharma etc. The issue of rising input costs continues to be a problem and land aggregation in India, as always, is tough." FUTURE GROWTH PROSPECTS On India's residential market investment Ambar Maheshwari shared, ““The current rental yields in the US range from 6% to 9%. In India it is 3%- 4% which makes it an unattractive proposition for investors, though the demand is huge. Also, flexibility is an important aspect. Co-working office spaces offer that with no lock-in periods or large Capex for corporates looking to expand or grow over the next five to 10 years. So this segment will do extremely well going forward.” Gaurav Karnik believes data centres have a lot of potential, “The more you look at data digitization in India, the more you realize the need for data centres. As data centre placement is influenced by optical fibres availability. Therefore cities near the port will become the hub of data centres, in terms of underwater cables and connectivity” Rajat Garg added, “Apart from residential there has not been a major supply glut in office, retail, and industrial real estate in the last decade and a half. With rising e-commerce in India, data centres and warehouses will be commonplace in the next 20 years.” Sushil Mohta feels there will now be more mixed-use developments across cities. “The developments and integrated townships comprising a mix of residential, retail and office are on the rise. It provides diversification of asset, as a result, there is improved cash flow management.” Harsh Patodia commenting on the prospects of real estate in the coming years said, “There needs to be a fundamental shift in how developers evaluate risk and take on projects, as well as how financial closing and profitability to be achieved. The organized or deep-pocketed developer will most likely survive.” Ramesh Nair concluded, “Investors have remained cautious about the residential sector. Commercial realty has seen consistent rise in PE investments, mixed-use sector and industrial and warehousing are the current favorite and industry status to data centres is likely to boost investment in that category.”,
Tags : Gaurav Karnik Real Estate National Leader and Tax Partner EY India Harsh Vardhan Patodia CMD Unimark Group & National President CREDAI Ambar Maheshwari CEO of Indiabulls Asset Management Sushil Mohta Chairman Merlin Group President Credai West Bengal Rajat Garg Director of Investments ESR India