MUMBAI:Equity investments into Indian real estate have been on the rise and will continue to gain traction owing to various reforms including clearance of Real Estate Regulatory Act (RERA) and the most recent demonetization move, said a JLL India report.
Out of total $5.2 billion private equity investments in real estate in the last seven quarters until September end, 43% were through equity structures. So far, over $2.8 billion worth of platforms have been created, are largely equity-based and focused on affordable and middle income-housing projects.
“We are expecting the model to grow further,” the report said.
The government’s efforts to make the sector more transparent such as smoothening process for listing of Real Estate Investment Trusts (REITs) and easing Foreign Direct Investment norms for real estate is helping in removing inconsistencies in the system.
“From the investors’ point of view, there couldn’t be a better time. Earlier, lack of uniformity and transparency were the key challenges the real estate sector was plagued with and this had kept the equity investor at bay,” the report said. “In a post Global Financial Crisis world ‘caution’ had become the mainstay for any equity investor’s valuation model. Today, however, the change towards better corporate governance and higher transparency is being seen across all industries, especially real estate.”
Since the GFC in 2008, the sector has seen equity infusion largely restricted to office projects closer to completion. Equity investors have clearly shied away from investing in residential projects due to various reasons, such as project delays, cost inflation, limited legal options for investors, changing real estate laws and inadequate corporate governance.
Credits ET Realty