FDI in Real Estate Increases By 84.4%

India’s real estate sector has recorded a significant growth with foreign direct investments amounting to a whopping USD 16.6 billion. The investments in the sector have surged by 84.4 per as compared to FDI received in 2005-2014. After foreign direct investment restrictions were lifted in 2005, the sector has received total investments worth USD 25 billion.

Since the year 2015, foreign investments have mostly been based on big-ticket income-yielding commercial and retail assets. Shobhit Agarwal, managing director and CEO of Anarock Capital said, “This period also saw the entry of significant Canadian pension funds into Indian real estate, either directly or through platform deals with Indian counterpart.”

“While Singapore-based funds led by GIC remained very active in this period, US-based funds led by Blackstone continued their love affair with Indian real estate and invested more than $5.7 billion in the same period,” he added.

When FDI norms were eased in the sector in 2005, Singapore-based funds were the first to cash in on the opportunities quickly, followed by funds from the U.S. and Europe. In fact, Singapore remains the biggest source of FDI in India. Between 2005 and 2008, the real estate sector in India received investments worth USD 5.7 billion.

“Considerable activity here came from capital providers like JP Morgan, Morgan Stanley, Goldman Sachs, Lehman Brothers, Wachovia, Walton Street Capital, etc. and Singapore-based developer capital providers like Ascendas, Xander, Mapletree and CapitaLand,” says Agarwal. However, post-2008, most funds withdrew from India because of limited exit opportunities. As a result, in the ensuing six years, only $3.4 billion worth of FDI was pumped into the real estate sector. “This period also saw considerable consolidation from Singapore-based funds like GIC, Ascendas, and Xander,” added Agarwal.

In 2020, the sector is expected to maintain its streak of development with high funding opportunities. “A few Japanese investors/corporates have been evaluating Indian real estate investment options and we can expect them to get into gear in 2020, along with pension and insurance funds,” says Agarwal. According to him, these funds are “inherently patient” and come with longer investment tenures. “They will play a significant role in providing the long-term solutions Indian developers now need.”