Overseas investment in Indian real estate boom 137% : Knight Frank report

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Knight Frank’s Active Capital report revealed that the Indian real estate has seen a massive surge from domestic as well as foreign players. According to the report foreign investments in Indian realty rocketed from USD 3.2 bn during 2011-13 to USD 7.6 bn during 2014-16 recording a staggering growth of 137%. Also, the domestic players almost doubled their investment to USD 2.4 bn from USD 1.3 bn during the same period. Knight Frank’s Active Capital report is a flagship global property report that analyses capital flow patterns across the world markets.

The report further states that while domestic investors dominated the real estate industry until 2008, foreign players entered the limelight since 2014, ostensibly following the change in government and courtesy friendlier policies,

Dr. Samantak Das, Chief Economist and National Director, Research, Knight Frank India, said, “The global economy has started recuperating with improving job prospects, decline in unemployment rates and rising rate of inflation in the developed economies. Investors in these countries are expecting diminishing inflation adjusted returns. With the strengthening of domestic currency they are finding assets in emerging markets (EMs) cheaper from an investment perspective. India, among all other EMs has attracted the highest interest of global investors on account of a stable government and implementation of path breaking reforms such as the Goods and Services Tax (GST) that would formalize the economy. Real estate being one of the most important investment assets has witnessed a surge in flow of foreign investments. With the sector undergoing a complete transformation at the back of the Real Estate (Regulation and Development) RERA Act 2016, Affordable Housing focus and the Real Estate Investments Trusts, the domestic investors have also joined the bandwagon.”

Accounting for more than 40% of the investments, the US held the largest share of foreign investors followed by Canada (18%) and Singapore (17%). Canadian investors largely the pension funds forayed into India since 2015. Mumbai, the financial capital of India attracted the biggest pie of foreign investments in 2016, accounting for at least 39% of capital flow in the Indian reality followed by Rest of India which accounted for a share of 32%. The share is significant primarily because the hot investments hubs of Gurugram and Noida were included in this segment. India’s Silicon Valley Bengaluru (11%) topped the chart among other metros followed by Chennai (10%) and Delhi (4%).

The sector-wise analysis for investments in 2016 showed that foreign investors were mostly lured by office spaces and the retail sectors. Collectively the two segments accounted for 72% of the investments, says the report. The findings were sync with overall global projections which showed that overseas investors were looking beyond global Super Cities. The report added that more than 30% of the total global real estate transactions will be cross border by 2018.

Knight Frank’s data evidences the rise of Asian investors, which accounted for USD67 billion of overseas investment in 2016, versus USD19 billion in 2007, which is recognized as the peak of the previous real estate cycle.

“Identifying the potential of this sector to create jobs and its multiplier effects on the economy, the government has been trying its best to revive the sector. It would be just a matter of time before this sector realizes and starts delivering on its full potential,” added Dr. Das.

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