Indian Real Estate Attracts $34 Billion Private Equity Investment Since 2014, Says Report
Indian real estate has attracted $34 billion in private equity investment since 2014, largely in commercial real estate because of slowdown in housing demand, according to property consultant Knight Frank and Royal Institute of Chartered Surveyors.
Ten million homes will be delivered by 2022 under the government's Housing for All scheme, the report said, adding that an additional 25 million affordable homes will be required by 2030 because of rapid urbanisation.
"Since 2014, around $34 billion has been invested in Indian real estate across debt and equity. Commercial segments, which comprises office, retail and warehousing, has garnered majority share of this in the form of equity investments. The residential segment had 31 percent share and most of it was in the form of debt," the report said.
The share of residential segment has shrunk over the years due to slowdown in the housing sector, it added.
However, the report noted that private equity investments into affordable housing projects has grown over the years and the segment has witnessed investments of close to $2 billion since 2014.
On supply side, the report said the current estimate of housing shortage in urban areas is around 10 million units. Most of the housing shortage lies in the Economically Weaker Section and Lower Income Group segment.
As of July, 8.36 million houses have been sanctioned by the government under the ‘Housing for All’ initiative. Construction for 4.9 million units has begun and 2.6 million units have been completed.
Given the past trend, additional 1.64 million houses are likely to be sanctioned by December, making it highly possible to achieve the 10 million houses target by 2022. Projected subsidy disbursement over next three year for the same is projected to Rs 1 trillion.
The RICS-Knight Frank report estimated that by the year 2030 more than 40 percent of the Indian population will live in urban India as against current 34 percent. This is likely to create a demand for 25 million additional affordable units.
However, the report said a subsidy-based approach may not be enough for maintaining sustained growth in the affordable housing segment.
Nimish Gupta, managing director of South Asia for RICS said, "The government is set to achieve the target 10 million by 2022, which is an unparalleled achievement, globally! Going by the rate of urbanisation this requirement will grow 2.5 times to 25 million urban affordable houses".
Gupta said the sector has to devise sustainable growth model, with private and public development agencies collaborating to create an ideal ecosystem.
Shishir Baijal, chairman and managing director of Knight Frank India, said: "Affordable housing is a high potential segment that the private development companies are yet to explore to its potential".
Unlike other segments of housing, he said the affordable housing poses an interesting challenge involving strategies at all levels.
"Given the requisite volume, this category may need to look at innovative solutions right across the stages of development including statutory clearance, design, building and construction management along with marketing and sale. We feel, a differentiated approach towards affordable housing will hold the key to its ultimate success and profitability," Baijal added.