Outlook for investments in infrastructure looks very optimistic
Institutional investment in infrastructure has witnessed a steady rise as the government formulated attractive schemes for the monetisation and recycling of operational assets, says Deval Valia, Senior Director, Capital Markets and Investment Services, Colliers India.What according to you is the outlook for investments in the infrastructure segment? Infrastructure sector development is essential for ensuring overall economic progress. Government of India has identified approximately USD 1.7 trillion worth of infrastructure development projects across sectors as part of the National Infrastructure Pipeline, to be developed via public private partnerships in order to achieve a GDP of USD 5 trillion economy by 2025. Significant efforts are being made to promote higher private participation through a strong PPP framework, concession agreements, viability gap funding and other financing mechanisms. Institutional investment in infrastructure has witnessed a steady rise as the government formulated attractive schemes for the monetisation and recycling of operational assets through the toll-operate-transfer model in order to raise capital for greenfield projects. The infrastructure sector accounted for approximately 13 per cent share of the total FDI as of FY21 with notable global funds such as Macquarie, Australian Super, OMERS, ADIA, CPPIB and Temasek being currently active within the sector. Additionally, the successful listing of InVITs, such as Power Grid and NHAI, have attracted retail investments in the sector providing additional avenues of asset monetisation and raising capital within the sector. The outlook for investments in the infrastructure sector looks very optimistic with the government's emphasis on developing global standard assets through fundamental restructuring and financing mechanisms combined with the positive sentiments on these policy reforms and the overall economic growth projections for the country. How do you evaluate the real estate market performance in India? Growth in India’s real estate sector picked up in Q1 2022 with residential sales surpassing pre COVID-19 levels. Demand was driven by both the affordable housing segment and mid-luxury segment, which benefited from favourable policies, such as lower interest rates and reduced stamp duty charges in some states. The office segment witnessed a rebound over the Q2 2022 with occupiers diversifying into tier 2 cities as well as gearing up for expansion plans. Hybrid working model continued to be the trend as companies’ further plans to return to working from office. High office demand witnessed over 2022 with increased global uncertainties in anticipation of a looming recession next year, office sector shall remain as the key focus in Indian real estate over 2023. Residential sales may witness temporary slowdown due to increase in the interest rates. The public market in the real estate, including REITs, has witnessed strong investor demand at both in the primary and secondary market. With successful listing of three REITs in India, there is a high likelihood of another large office REIT and retail REIT to be listed in next 12 months. What innovative technologies have been recently introduced for efficient construction management? Large Infrastructure projects have significant economic impact on the society along with improvement in overall standard of living of citizens. Owing to their capital-intensive nature and long completion timelines, any delays or hurdles may result in huge financial losses along with environmental as well as societal impact. New technologies for construction as well as project management have been actively adopted by developers to improve efficiency across the lifecycle ranging from site selection, design to execution and delivery of the project. Global positioning systems, geographic information systems and remote sensing are actively used for site selection so as to determine its suitability and identify any hurdles. Accurate models are prepared to not only determine the project feasibility, but also to assess environmental and ecological impact of the proposed project on the particular site. Modern integrated project planning and building information modelling software are used by managers to efficiently plan out activities, linkages and dependencies so as to avoid bottlenecks and ensure smooth functioning. Additionally, artificial intelligence and machine learning technology is adopted to ensure a smooth supply chain by accurate and timely estimation of material quantities assessment of existing stock, inventory so as to avoid any delay on account of shortage of material supply. Also, higher adoption of automation in the execution stage has been witnessed to reduce dependencies on manual labour and improving efficiency.