Chinese realty developers seek JVs in India

After global private equity and sovereign funds, now Chinese developers are eyeing investment opportunities in India’s property sector.

A team from international property consultancy JLL is holding exploratory talks with Indian developers to seek investment opportunities for their Chinese clients. The Chinese developers are looking to forge strategic partnership and enter into joint ventures with Indian builders to invest in large scale residential projects.

China’s outbound investment directly into global real estate has risen 50% to $15.6 billion since January this year with New York, London and Sydney becoming the leading investment destinations.

As a first major investment by a Chinese company, one of the largest developers Dalian Wanda Group has announced its intention to invest $10 billion in India in the next 10 years to construct industrial townships and retail properties.

“Major attraction for this investment is growth. Next 10 years of growth cycle in Indian real estate will be similar to what China had experienced in the past 10 years,” said Alistair Meadows, head International Capital Group (Asia Pacific) JLL, Singapore.

Apart from expectations of attractive returns, slower real estate market in China itself is also prompting Chinese developers to look elsewhere, including India. “We can expect at least $3-4 billion investment inflow from China into the Indian property market over the next 3 years,” said Shobhit Agarwal, MD, Capital Markets & International Director, JLL India.

During his visit to Beijing in May, Prime Minister Narendra Modi had pitched for Chinese investment into India to help bridge a widening trade gap. According media reports, his visit had witnessed deals worth $22 billion being signed.

“Indian developers are achieving returns more than most mature markets the world over are fetching,” said Darren Xia, Head -International Capital Group, JLL China, while explaining Chinese developers’ interest in the Indian property market. “A number of Chinese developers have been studying the Indian market since the past 12 months.”

Meadows and Xia, who have been holding talks with Indian players for striking an alliance with Chinese builders, expect Chinese insurance companies to start investing here. According to an estimate by JLL, Chinese insurance groups could allocate up to $240 billion to real estate outside of China, based on current metrics over a longterm period.

Continued loosening of outbound investment regulations since 2012 is driving China’s insurance groups to actively seek real estate assets in gateway cities around the world. These funds are keen to take advantage of the asset class’s income-producing characteristics, its relatively low risk, and the benefits of a diversified portfolio.

Investments from China-based builders are expected in big-ticket projects in key property markets of India. “While investing, scale will be crucial for Chinese developers as they are familiar with the large scale development. To begin with, investments are expected in Mumbai, Delhi and even Kolkata. Most of what they (Chinese developers) will do will be opportunity led,” Meadows added.

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