Foreign investments in India’s real estate sector are like a breath of fresh air for the entire industry, just like Sunshine on my shoulders as John Denver famously sang. Now, Singapore is the country shining the light on the Indian realty space as per latest reports. Indian real estate is already witnessing a well-documented recovery over the last few months. In fact, much of this started from the second half of 2018 according to experts.
The Government had undertaken several measures to clean up the sector (not with a broom) including GST, RERA and the Benami Property Act, before which came demonetization that initially de-stabilized the sector. These are major initiatives which have cleaned up the sector and made it more attractive for global investors.
Singapore investors show rising interest in Indian real estate
Latest reports and studies indicate that Singapore investors are increasingly growing more excited about the future prospects of Indian real estate which is good news for the sector overall. Here are some of the major trends that deserve a closer look:
- Firms based in Singapore invested a whopping $1.15 billion into the Indian real estate sector in 2015 and 2016.
- Investments from Singapore entities touched almost $3.5 billion in the years 2017 and 2018.
- Xander, GIC and Ascendas-Singbridge, among other private equity entities, are investing billions into the real estate sector in India.
- Investors from Singapore are placing a huge bet on the commercial real estate sector in India and other rapidly growing segments like warehousing and logistics as per experts.
- Private equity firms as mentioned above have been investing considerable amounts in cities in South India which seems to be a preferred hotspot.
- Reports state that approximately 1/4th of the $14.01 billion of private equity investments in the real estate sector in India between the years 2015 and 2018 came from firms based in Singapore. This is the highest such investment volume reported from foreign and domestic investors alike.
- Real estate developers in India are now taking recourse to equity and debt based funding from multiple private equity firms since funds have been limited from the banking and NBFC sectors. Investors from Singapore occupy pole position in this regard followed by those from the United States and Canada.
- India has been a preferred realty investment destination for investors in Singapore after they have already consolidated their presence in China.
- India’s real estate sector has witnessed the growing establishment of several real estate developers and investors from Singapore over a period of 4-5 years and these investors usually have a long-term perspective along with greater reserves of patience.
As can be seen, investments from firms in Singapore have increased substantially over the last few years. GIC reportedly has pumped in close to $2.5 billion, particularly in major cities like Chennai, Mumbai, Bangalore, National Capital Region (NCR) and Hyderabad. Ascendas has been making investments in areas like Chennai, Hyderabad and the MMR (Mumbai Metropolitan Region).
Investors from the United States including Goldman Sachs, Blackstone, Warburg Pincus, Hines and Proprium Capital have invested close to $4 billion over the last four years in the Indian market. Reports state that out of this tally, Blackstone has invested almost $2.9 billion in this time period. Private equity firms from Canada are at the third slot in terms of overall investments, having pumped in $2.3 billion over the last four years including CPPIB and Brookefield.
Singapore investors step up the tempo in Indian real estate market
Singapore is thus the unlikely hero for the Indian real estate sector at the moment, outstripping established investment regions like the US and Canada as mentioned earlier. Investments have been going up steadily from PE entities and they have tripled investments in the years 2017 and 2018 which equates to a vote of confidence in the Indian realty sector. They are also emphasizing on residential real estate in tandem with commercial and office space segments along with factories, warehousing facilities and logistics spaces.
GIC also acquired a stake of 33% back in end 2017 in none other than leading Indian real estate player DLF. The deal was valued at reportedly Rs. 90 billion and was a watershed moment for the sector in general. Singapore’s increasing realty investments are coming at a crucial time for developers who are beleaguered by the tighter liquidity owing to the crisis at IL&FS. Experts also highlight several reasons for Singapore investors eyeing Indian real estate in recent years.
These include the following:
- Ease of doing business has gone up considerably in India while the introduction of REITs and fast paced infrastructure development are major investment incentives.
- India’s economic growth and Singapore’s overall comfort with market conditions here are other investment drivers.
- The regulatory framework in the country is also perceived as favourable by investors from Singapore.
- PE firms from Singapore are anyway expanding into major real estate markets worldwide and India is also a vital part of their plans.
- With global investors from China going slow on global realty investments, Singapore’s PE firms and individual investors are steadily filling up this vacuum. Chinese realty investments have come down to lower than even $5 billion annually which indicates de-growth of 84%. At the same time, $25 billion was spent by firms in Singapore for global realty investments.
- 40% of this tally was allocated for markets in Asia.
- Investors from Singapore are looking for greener pastures in India and other property markets on account of a lower number of assets that can be invested in back in their home market.
- Singapore is now one of the biggest Asian capital contributors as far as global property markets are concerned and India has clearly benefited.
Indian real estate developers should definitely be raising a toast to PE entities from Singapore and other individual investors since more capital (as in all other situations in life) is always welcome!