Real estate investors stay optimistic about returns

Investors in Indian real estate sector are quite optimistic about 2016 as the majority of them feel that the recent regulatory initiatives such as the relaxation of FDI rules in real estate and passage of Real Estate Regulatory Bill will enhance investment in smaller projects and positively impact the sentiment by boosting buyer confidence.

According to an investor survey conducted jointly by JLL India and RICS, a majority of respondents believe that Japanese and Chinese investors will enter the Indian real estate market in 2016. This trends is something new, as historically the sector has attracted FDI mainly from countries like the US and UK. The survey found that over 70 per cent of the respondents including private equity investors in real estate foresee improvement in sales over the next 12 months.

The year 2015 had seen a number of new investors in the real estate space. This included some of the large global PE funds. It is expected that this trend is likely to continue in the year 2016. Approximately 62 per cent of the respondents felt that in 2016 it is likely that institutions from Japan and China could enter the India real estate market.

After a relatively muted CY 2013 and CY 2014, PE investors increased their bets significantly in the Indian real estate sector in CY 2015 with estimated investments of $5.1 billion across 86 deals as against $2.3 billion of investment reported across 63 deals in CY 2014.

According to the survey, the majority of the respondents are of the view that the share of pure equity in the overall investments is expected to increase over the next 12 months. This aligns with the recalibration of the investment community’s role as a long-term partner with key and select developers.