As per Rahul Raj Gogna, Sr. Director and Head-Capital Markets, Bangalore, JLL India, “Due to the significant geographical disturbances and geopolitical changes worldwide, the interest rates are being adjusted, particularly in the Eurozone. However, central banks globally are recognizing that inflation is becoming more controlled. Additionally, the recent election results in the United States have provided a decisive mandate, influencing markets globally, while China’s strategic planning continues to play a substantial role.”
Lakshmipathi Chockalingam, Senior Managing Part- ner, ASK Property Fund, expressed, “Despite potential global disruptions and fluctuating interest rates, the domestic economy remains resilient. The maturity of the Indian home loan market is evident as borrowers typically settle their loans within 7 to 8 years, resulting in non-performing assets below 1%, thus demonstrating robust market resilience against global economic challenges. For investors whether investing one crore or 100 crores, their primary challenge lies not in deployment but in fundraising, where investors assess both market conditions and the fund manag- er’s capability in managing assets effectively, even amidst complex regulatory environments and liquid- ity constraints.”
Anuj Kapoor, Founder & Partner, Upwisery added, “The domestic banking sector currently has a substantial liquidity, evidenced by strong balance sheets and notable growth in real estate credit, which increased from 12-13 lakh crores five years ago to 35 lakh crores as of March this year. Despite the potential for higher global capital absorption in the Indian real estate market, our share remains below 3%, largely due to past global market dynamics and interest rate fluctuations that have made investors cautious.”
Navin Dhanuka, Founder & CEO, Altern Capital, said, “Despite our robust domestic market strength, evidenced by high liquidity and oversubscribed IPOs, there is a propensity for higher risk investment due to confidence in the national economy and scepticism towards traditional deposit products. Despite significant demand for real estate, especially in growing cities, the challenge today lies in securing adequate funding from both domestic and international investors who are hesitant to make pure equity investments. Consequently, alternative financial instruments and increased support from AIFs are essential to meet the burgeoning demand for land investment, as traditional banks and NBFCs are unable to provide the necessary funding.”
Sudarshan Lodha, Co-founder & CEO, Strata, shared, “There’s a significant interest among investors who have smaller capital pools, generally ranging between ten lakhs to a crore, seeking transparent investment options beyond traditional fixed deposits, especially post-Covid, as financial literacy has increased among those aged 28 to 40. Also, regulatory bodies now are more proactive rather than reactive. For instance, SEBI has issued more consultation papers in the past two years than in the previous decade, supporting innovations and running its own sandbox. This proactive approach allows for innovations like video KYC becoming mainstream, as regulators strive to address potential issues before they escalate.”
SPECIALIZED FINANCIAL INSTRUMENTS
Anuj Kapoor said, “The primary concern for any developer is obtaining affordable capital, particularly at the early stages of a project when financial support from banks and NBFCs is limited. This creates opportunities for thematic funds with different focuses, such as geographical or asset class-specific investments, catering to varying investor pools and introducing new investors into the real estate market through options like fractional ownership.”
Sudarshan Lodha added, “India possesses significant market potential, and financialization, which allows developers to control 75% while gaining liquidity from the remaining 25%, could significantly simplify asset management and enhance market participation. The evolution of products like securitized debt instruments, now listed on the exchange, signifies a promising horizon for innovation and growth in the real estate sector.”
Lakshmipathi Chockalingam stated, “We are refining two methods for handling substantial family office investments: First, we offer co-investment opportunities matching their fund contributions, allowing them to invest at a lower cost; second, we create a leveraged play by organizing funding through an NBFC, improving yield through arbitrage. However, these strategies require cautious execution to mitigate risks.”
Navin Dhanuka added, “Jiraaf and Altgraaf are two platforms that facilitate investment in both listed and unlisted products, aimed at providing secure investment opportunities for middle and upper-middle-class individuals. By allowing smaller investors to participate in transactions typically accessible only to larger entities, these platforms offer a way to earn higher returns, especially in the real estate sector.”
Rahul Raj Gogna summarized, “In 2024 total investments in India surpassed $8 billion, marking a 12 to 14% increase compared to the previous year. Nota- bly, 40% of these transactions are domestic, with significant contributions from AIFs. The current trend is of specialization with a clear focus to attract informed investors and achieve timely returns. And, the credibility and track record of the fund manager is becoming the top priority.”
THE HIGHLIGHTS
Financialization of real estate is a new concept, allowing inavestors to invest in financial instruments backed by real es- tate rather than solely in hard assets.
Private capital and private credit are both on the rise. In real estate, funding sources include banks, NBFCs, and PE funds, with the borrowing cost for the developers ranging from 9.5% to as high as 24-25%.
The focus will shift towards more specialized, granular strategies within the in- vestment landscape as maturity increas- es, particularly in residential markets which will see product and geographic breakdowns.
Developers are now engaging in plotted developments due to their high IRR and swift profitability, signifying a move towards specialized asset classes.
Family offices have evolved significantly. Some mid-market family offices allocate substantial capital towards real estate through established funds, others prefer direct co-investment opportuni- ties that promise higher returns than typical 14-15% IRR offered by blind pools.
Online bond broking platforms are gaining traction, offering access to a wider pool of retail investors. This enables varying levels of investment and promotes transparency with access to vital information regardless of the siz of their contribution.
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