Real Estate - Real Gains

India has emerged as one of the prime investment destinations of the world in recent years. With private equity players considering big investments, banks giving loans to builders and financial institutions floating real estate funds one can see that the real estate sector in India is attracting huge investments. The total investments going into the Indian real estate market could be seen hitting $ 1.5 billion in the next fiscal. The new FDI policy is expected to allow up to 100 per cent investment under the automatic route in townships, housing, built-up infrastructure and construction-development projects such as hotels, resorts, hospitals, educational institutions, housing and commercial premises. The Indian Government has also reduced the minimum mandatory area to allow FDI in real estate sector from 100 to 25 acres. Hence, with such huge investment buzz and high income growth, Indian real estate sector is all set to flare up. This $ 48 billion industry that is expected to grow at a CAGR of 21 per cent in the next five years.
Real estate companies with large presence in metros, better access to capital and the ability to structure and execute projects will be the leaders. Industry deregulation, improving demographics and continuous urbanisation accompanied with stronger IT/BPO industry growth would be the primary drivers. Major international investors such as US-based Warburg Pincus, Blackstone Group, Broadstreet, Morgan Stanley Real Estate Fund (MSREF), Columbia Endowment Fund, California Public Employees’ Retirement System (CalPERS), Hines, Tishman Speyer, Sam Zell’s Equity International, JP Morgan Partners and Amaranth Advisors are expected to establish their presence in the Indian real estate market. A few funds belonging to the Warren Buffet’s Berkshire Hathway are also interested.
Indian institutions such as HDFC, ICICI Venture and Kotak Mahindra would be launching funds to invest in real estate. ICICI Venture is raising Rs 750 crore real estate fund and is tying up with Tishman Speyer, while HDFC in association with SBI is raising about Rs 1000 crore for a real estate fund. HDFC is likely to invest in residential, commercial, and IT properties. Kotak will be raising a real estate fund.