Realty investors eye India, Vietnam

Mumbai: PwC on Monday said that the institutional money flowing into the Indian real estate market are strategic in nature aimed at front running long term economic growth resulting from the recent economic reforms.

While Indian cities did not feature prominently in this year’s investment prospect rankings, probably because of ongoing qualms over operational difficulties, PwC noted that the strong flows of institutional and sovereign wealth-type capital have continued.

According to a joint PwC-Urban Land Institute study, India and Vietnam rank as most popular developing markets.

However, it added that unlike Vietnam, India offers massive scale, a factor that makes its especially popular for funds deploying large amounts of capital.

“With most high-quality pre-existing assets already accounted for, international funds are turning increasingly to build-to- core projects, affordable housing and other opportunistic investments. There is trend which is picking up at a pace never seen before in unconventional assets classes, specifically, co-working space. Recent investment in modern logistics assets, driven by the increasing demand from e-commerce and recent tax reforms, gives something like a gold rush feel to it,” said Bhairav Dalal, partner – real estate tax, PwC India.

Though big investors have dominated Indian real estate sector till date, the report highlighted that smaller funds are also now lining up.

Most international investors in India continue to prefer commercial property, with capitalisation rate currently averaging in the range of 8.5 to 8.75 per cent. In addition, retail assets are also now a popular play with a number of platform or portfolio deals either already completed or in the works.

However, the report noted that the residential space continues to suffer including due to government reforms that include demonetisation, GST and increased regulation of real estate development practices.