January 09, 2018
When Donald Trump launched the Trump Tower Pune Project in 2014, he told the assembled press pack (using what we have since come to recognize as his gift for few words), that the Project would be “good for India”. Well, few words or not, it was good for Pune, and the 45th President of the United States (a man who knows a thing or two about real estate) might equally well have been summing up the future of the Indian economy as well: because, as it happens, Real Estate is good for the India too.
And as we move into 2018, all the evidence suggests the subcontinent’s Real Estate Sector is still set fair for the foreseeable future, so that’s good news for the Subcontinent’s Economy well.
Real Estate has now become the second largest employer in India (after agriculture) and it is expected to assume even greater sectoral importance over the coming decade (forecasts produced by the IBEF suggest a dizzy 30%). And no doubt President Trump would be heartened to learn too that in the Global House Price Index India jumped last year by thirteen places to sit at 55th Globally: a consequence of ferocious price competition in the mainstream residential sector on the subcontinent.
And in hard cash terms, the real estate sector is currently expected to generate a staggering $180 Billion in gross revenues by 2020, which is little short of breathtaking given it already accounts for 6% of India’s GDP.
Private Equity Investment in Indian Real Estate (a key bellwether of economic resilience) grew by 26% last year to a nine year high and direct investment has risen to $7 Billion. Notable participants including South Korea’s Mirae Asset Group, which is planning to expand its Indian operations by investing in excess of $500 Million in commercial leased properties; Canada Pension Plan Investment Board (the Canadian Pension Asset Manager), which has agreed to take a 49% stake in Island Star Mall Developments; and Qatar Holdings LLC (a subsidiary of the Qatar Investment Authority) which has committed to invest $250 Million in the affordable housing fund of Arthveda Fund Management.
Perhaps the most striking feature of that glittering investment roster is that the bulk of the companies involved are not Indian by domicile, which also reflects well on the success of the Modi Government’s FDI Programmes.
And whilst we’re talking of Government, it is pleasing to note too that the significant initiatives announced last year, each designed to stimulate investment in real estate seem now to be bearing real fruit at a local level. Take for example the new public private partnership (PPP) where no less than eight new options have been unveiled by the Ministry of Housing and Urban Affairs to stimulate provision of more and better units in the affordable housing segment; and also in Delhi where the Government has just declared 89 out of 95 villages to be Designated Urban Areas (pursuant to new provisions in this year’s Union Budget) all of which will ease the previously complicated process of land pooling and provide a further boost to the provision of housing in this increasingly overpopulated area.
Real Estate was the second largest employer in India last year (after agriculture) and over the coming decade it is expected to contribute no less than 30% of Indian GDP. The Sector is proving to be a growing powerhouse for economic growth on the subcontinent, currently forecast to generate $180 Billion in gross revenues by 2020.
Red Ribbon has always placed Indian Real Estate at the heart of its portfolio management strategies and these latest figures fully vindicate that decision. Through diverse projects such as Modulex and Eco Hotels, I am confident that we will continue to harvest the rewards of this exciting sector for many years to come.
All in all, things are looking good for 2018…