India’s real estate received $16.6 billion worth of foreign direct investment (FDI) in 2015-2019, a whopping 84.4% increase over the quantum of investments that flowed into the country in 2005-2014. Overall, since 2005, when restrictions on FDI in real estate were lifted, the sector has received more than $25 billion in funding.
Since 2015, the funding has largely been on big-ticket income-yielding commercial and retail assets. “This period also saw the entry of significant Canadian pension funds into Indian real estate, either directly or through platform deals with Indian counterpart,” says Shobhit Agarwal, managing director and CEO of Anarock Capital. “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 billon in the same period,” adds Agarwal.
Ever since FDI restrictions were lifted 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, between 2005 and 2008, Indian real estate received investments worth $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,” adds Agarwal.
In 2020, FDI in real estate is likely to remain on Grade A income-generating assets along with last-mile funding opportunities in residential projects. “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.” If his predictions come true, then 2020 promises to be an action-packed year for FDI in real estate.