The recent efforts of Indian government to improve transparency and governance standards in the real estate sector will boost foreign institutional investor interest, said Alistair Elliott, group chairman of Knight Frank in an exclusive interaction with Kailash Babar.
Elliott complimented the Indian government for the series of amendments in REIT regulations over the past two years to put Indian regulations at par with global standards. Elliott is of view that the Floor Space Index (FSI) ratios are much lower compared to international cities, but can be gradually increased if work on infrastructure development goes hand in hand.
There are a lot of new regulatory developments taking place in India, including Real Estate Regulatory Act (RERA) and Real Estate Investment Trust (REIT). How do you perceive this from a foreign investors’ view?
It is an outstanding effort from the government to increase the transparency and governance standards in the real estate sector. Both the Real Estate Regulation Act (RERA) and the Real Estate Investment Trust (REIT) regulations will, in effect, attract more overseas institutions investors and developers to participate in the Indian real estate sector.It is important the local market is as transparent as possible and anything that opens India for foreign investment, whilst being transparent, will be of use to India.
With REITs receiving the green signal, do you think India will be a hot market for investors around the globe?
While the law was in place in 2014, no REIT has seen the light of the day in India. The government has sweetened the deal by acting on a host of aspects, and a series of amendments over the past two years have put Indian regulations at par with global standards.With the stage now ready, the country could see its first REIT in the next 6 months. Sebi chairman has announced two REITs to be listed in current financial year. Increasingly investors are looking for diversification for their portfolios; therefore emerging markets with improved regulation will increasingly attract overseas investment.
What changes do you see in the Indian realty market in the next few years? What would you like?
The set of regulatory changes that have already been introduced by the government, coupled with best construction practices that international developers bring to the sector, should lead to transformation, improved regulation, greater transparency of ownership, ease of movement of money in and out of the country, certainty of leases, confidence in construction and a stable political environment.
Most Indian cities have FSI usage limit compared to other international cities…
The FSI limit should go in tandem with the infrastructure carrying capacity.In case of India, the FSI is much lower compared to international cities but should be gradually increased if work on infrastructure development goes hand-in-hand.
Mumbai and Delhi now feature in the world’s most expensive office spaces. Do you think this is justified based on the infrastructure here or is this because other markets have crashed or are still to recover fully?
In fact, India is among the most affordable globally. For instance, as per our Global Cities Report, Mumbai ranks number 5 out of 30 global cities in terms of prime office space cost. With an investment corpus of $100 million, 2,12,472 sq ft of prime office space can be bought in Mumbai compared to just 13,966 sq ft in Hong Kong. It is also evidence of the growing popularity of emerging cities. Future growth will depend on quality of buildings and levels of demand.
Lot of luxury brands are joining hands with Indian developers for branded residences in India…is India ready for this kind of offerings? What would be the next trend one can expect in this segment?
Branded residences in cities like Mumbai, NCR, Bengaluru and Pune have seen appreciation from customers. In future, with rising consumer aspiration, we could expect the branded residence developments expanding footprint in Tier II cities. This is a relatively established model, to link developers with branded residences and we would expect this to continue to grow.
How would you say Indian property market has evolved as compared to Dubai or London?
London has the benefit of a long established real estate market. Dubai has emerged, but with greater transparency and great focus on infrastructure noting that in both instances the scale is very much more modest compared to India.
Do you see more Indians investing overseas? If yes, then what do you think would be the reason?
Yes, with the growth in the HNI population in the country, investment overseas is also on a rising trajectory. Better quality of life and health, business opportunities and better tax environment are the top reasons for Indians to invest overseas. With Brexit, we have seen an increased interest in London from India.
Credits ET Realty