At a time when India’s housing market is yet to recover from a prolonged slump, demand for commercial real estate has continued to grow with several large institutional investors pouring big investments into the segment.
“India is a multi-decade story for Brookfield and not a five year story. We have a large footprint in India but we still call ourselves a start up in the larger context of the Brookfield platform we have globally. Real estate houses the economy and the economy is doing well," said Ankur Gupta, managing director & regional head, India real estate, Brookfield Asset Management.
India is an important market for the Canada-based investment firm and its presence would not be restricted just in the office market but would look at expanding into other emerging real estate segments like rental housing and industrial housing, Gupta said at a panel discussion on “Real Estate: Finally out of the woods", as part of the Mint India Investment Summit 2019.
Similarly for Canada Pension Plan Investment Board (CPPIB), “India has been under its radar since 2010" given that the country is one of the largest economies of the world", said V Hari Krishna, director - real estate investments, India, CPPIB. However, despite being a growing economy, India has shortage of good quality real estate assets, he said, adding that the company’s strategy in India is to form strong partnerships.
Rajesh Agarwal, chief executive officer and managing director, Shapoorji Pallonji Investment Advisors added that with the advent of long term investors that commercial real estate market has significantly evolved over the last decade. “The attractiveness of commercial sector is relatively higher. There is a lot of maturity in terms of how investors look at commercial as compared to residential. Capital has been flowing far maturely to a select set of investors and select of operators," he said.
According to Vinod Rohira, managing director, (commercial real estate and REIT), K Raheja Corp., the residential segment is away from recovery by another 12-15 months when consumer sentiments start to pick up. He said the slowdown of residential market primarily due to inefficiency and lack of prudence on capital investment. “Because of easy capital you went on signing on MoUs and went on creating new assets on paper. Developers were not sensitive to consumers. And then it was hit by demonetisation, new regulations and GST."
Chintan Patel, partner - deal advisory, (real estate and hospitality), KPMG in India said that the market is in a cycle where residential has run its course. “However, we still have a GDP in excess of 6.5 -7% and still doing well, which means the demand for commercial will increase as we move forward," he said
While home sales showed a steady rise in 2018, the liquidity crisis that hit non-banking financial companies (NBFCs) towards the end of the year impacted sentiments both homebuyers and developers.
“We have been fairly unscathed by what is happening in residential real estate. Kotak has a fair degree of understanding of credit. We are now even getting calls for construction funding while we never had a situation like this two years ago. Developers are willing to pay higher rate," said Vikas Chimakurthy, chief executive officer, Kotak Realty Fund.
Reforms such as new real estate regulations, GST and Insolvency and Bankruptcy Code (IBC), though disruptive, have brought financial discipline and consolidation in the sector.
“Combination of RERA, GST and IBC have a transformational impact on the way we have approached real estate. Gone are the days when somebody with cash and with a land parcel can be a developer. This augurs well not just for both developers and investors," said Yogesh Singh, Partner at law firm Trilegal.