Foreign investors’ interest in Indian real estate is on the rise after almost five years, India-specific fundraisings indicate.
The cycle started gaining momentum just before the 2014 general elections and at least $2.2 billion (Rs 14,680 crore) of funds have been raised so far in the current investment cycle, indicating an improvement in foreign investors’ confidence in Indian real estate, said consultancy firm JLL India. “During the pre-GFC (global financial crisis) phase, 82% of funds got raised in US dollar.
This reduced to 57% in post-GFC phase when micro-market understanding was required more than banking on the macro-economy,” said Shobit Agarwal, managing director of capital markets at JLL India. “Interestingly, the contribution, 2014-onwards, has increased considerably to 70% – hinting that the positivity is here to stay for some time.”
Recent easing of foreign direct investments rules is expected to bring in more capital into the property sector. PE funds are also looking to leverage on this rising interest among foreign investors.
“We believe this is an opportune time to invest in Indian real estate, with rigorous risk management and strong asset management.
Offshore funds are showing interest in Indian real estate and there is lot of interest from FDI funds back in Indian real estate,” said Rubi Arya, chief executive of Milestone Capital Advisors. “We are planning to leverage further on our structured debt and commercial platform to raise money from offshore funds.”
According to Arya, FDI funds are looking to invest in pre-leased commercial assets, create strategic-level partnerships with reputed developers mainly through equity deals and make structured debt investments in residential projects.
India-specific cumulative fundraising attained its peak in the pre-GFC period. During this period between 2005 and 2008, there were 50 such funds that raised $16 billion in total. However, post-GFC, only 29 funds got raised in five years, with cumulative fundraising of $3.9 billion, said the JLL India report.
Not only has the volume of investment increased, but there has also been an increase in the average investment size from $134 million to $184 million in the current cycle that started in 2014.
