What do foreign investors in real estate look for?
Real Estate

What do foreign investors in real estate look for?

Over the past few years, 100 per cent FDI has been permitted in construction development, with the intention of attracting foreign investment in Indian realty, says Shobhit Agarwal, Managing Director & CEO, Anarock Capital. 
So, have recent reforms helped increase the interest of overseas funds in India?

“Over the past five years, overseas pension funds, sovereign wealth funds and real-estate funds have invested ~$10 billion in Indian realty, primarily towards buying out ready assets and financing for upcoming assets,” says Prateek Jhawar, Director and Head, Infrastructure & Real Assets, Avendus Capital. “In 2017, these funds emerged as the biggest investors accounting for ~70 per cent ($2.2 billion) of real-estate investments in India. Most funds are entering India at a time when developers are struggling to stay afloat and equity funding is far from frequent. Their investments in development tend to take the form of structured equity/debt in the early stages of the project for development; whereas the buyout of income generating assets provides a much-needed exit channel for liquidity-seeking developers.”

“With the government undertaking reforms in areas such as RERA and ease in InvIT/ REIT regulations, global funds seem to be gaining more confidence in Indian real estate and are opting for JV or platform deals,” Jhawar continues. “They see potential to grow over a 7-10 year horizon, especially with good developers that generate good returns over the real-estate cycle. Players such as GIC, Brookfield, CDPQ, APG, Qatar Holdings, etc, have already entered the Indian real-estate market with plans for long-term investments. Qatar Holdings has recently pumped $250 million in Arthaveda Fund Management to invest in low and middle-income residential projects.”

In future, Jhawar expects real-estate funds to play a key role in financing projects as the average size of projects is increasing and the NBFC sector is facing a liquidity crunch. 

“Foreign investors are definitely interested in investing in real-estate projects in India,” says Karan Bolaria, CEO, Godrej Fund Management. “They look for projects delivering returns of 15-18 per cent to cover the currency risk, development risk and any country-specific risks along with their own returns thresholds.”

 

Over the past few years, 100 per cent FDI has been permitted in construction development, with the intention of attracting foreign investment in Indian realty, says Shobhit Agarwal, Managing Director & CEO, Anarock Capital.  So, have recent reforms helped increase the interest of overseas funds in India? “Over the past five years, overseas pension funds, sovereign wealth funds and real-estate funds have invested ~$10 billion in Indian realty, primarily towards buying out ready assets and financing for upcoming assets,” says Prateek Jhawar, Director and Head, Infrastructure & Real Assets, Avendus Capital. “In 2017, these funds emerged as the biggest investors accounting for ~70 per cent ($2.2 billion) of real-estate investments in India. Most funds are entering India at a time when developers are struggling to stay afloat and equity funding is far from frequent. Their investments in development tend to take the form of structured equity/debt in the early stages of the project for development; whereas the buyout of income generating assets provides a much-needed exit channel for liquidity-seeking developers.” “With the government undertaking reforms in areas such as RERA and ease in InvIT/ REIT regulations, global funds seem to be gaining more confidence in Indian real estate and are opting for JV or platform deals,” Jhawar continues. “They see potential to grow over a 7-10 year horizon, especially with good developers that generate good returns over the real-estate cycle. Players such as GIC, Brookfield, CDPQ, APG, Qatar Holdings, etc, have already entered the Indian real-estate market with plans for long-term investments. Qatar Holdings has recently pumped $250 million in Arthaveda Fund Management to invest in low and middle-income residential projects.” In future, Jhawar expects real-estate funds to play a key role in financing projects as the average size of projects is increasing and the NBFC sector is facing a liquidity crunch.  “Foreign investors are definitely interested in investing in real-estate projects in India,” says Karan Bolaria, CEO, Godrej Fund Management. “They look for projects delivering returns of 15-18 per cent to cover the currency risk, development risk and any country-specific risks along with their own returns thresholds.”  

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