A survey conducted by KPMG, in association with NAREDCO and APREA, has revealed that the Indian real estate sector is estimated to grow to USD 650 billion by 2025 and surpass USD 850 billion by 2028, to touch USD one trillion by 2030. The report, released on September 27, 2018, noted that India has consistently improved its ranking in global real estate since 2014, which has instilled confidence in investors.
Speaking about the findings of the report, Neeraj Bansal partner and head, ASEAN corridor of KPMG in India, said this growth is driven by emerging asset classes, such as affordable housing and co-working spaces. “As by-products of this growth, the average yearly contribution of 67 per cent to Indian gross domestic product, is anticipated to almost double by 2025, while generating employment opportunities for over 66 million people in parallel,” he added.
According to the report, private equity investments in Indian real estate improved 15 per cent year-on-year in January-March 2018, reaching USD three billion and is estimated to grow to USD 100 billion by 2026, with tier-1 and tier-2 cities benefiting the most in future. “The Indian realty sector has been struggling with unsold inventory, reduced buyers’ confidence, delays in projects and negative cash flows, for quite some time. However, a number of growth-promoting regulatory developments and initiatives, announced over the last two years, are paving the way for strong sector growth in the future,” the report said.
The report further noted that USD four billion has been invested by institutional investors in 2018, so far, with the average deal size crossing the USD 150 million mark, the highest in the last five years. In 2018, the report said, the average deal size tripled to USD 157 million, compared to USD 47 million in 2016. Of the total investments that have come in 2018, nearly 44 per cent are from foreign investors, primarily from the US, Canada and Singapore. Also, over 90 per cent of the foreign investment have preferred commercial projects across Mumbai, Pune, Bengaluru and Hyderabad. According to the study, the average deal size of foreign investors is USD 149 million, compared with domestic’s USD 87 million. These domestic investors have equally preferred commercial (USD 959 million) and residential (USD 870 million) projects.
“Overall, Mumbai has been the preferred destination, attracting 53 per cent (USD two billion) of the total investments. Most of these investments have come from foreign investors. Hyderabad (USD 793 million) and Bengaluru (USD 694 million) are preferred destinations of domestic investors,” it said. The report further noted that there is underutilisation of over Rs 20 billion worth of real estate investment trust (REIT) office stocks, offering a potential rental yield of up to 7.5 per cent.