After being in the doldrums for the last three-four years, things are beginning to look up for the Indian realty sector. And government policies such as RERA and GST have changed the business dynamics for the sector. BusinessLine caught up with Steven Swerdlow, CBRE’s CEO for Asia-Pacific, to know where India stands as an investment destination, if warehousing could turn out to be the dark horse here, and what can make affordable housing work in the country. Excerpts:

The government has brought about important policy changes. How do these measures impact foreign fund inflow into the sector?

I would say these changes make it easier to do business and are driving growth in the economy. Capital gets attracted mostly by transparency, yield and safety. So we are seeing more money coming into India because of these factors. India is an emerging market and there is clearly an increased comfort level among foreign capital in investing here. Be it Singapore, Japan or the US, they are comfortable with the yield and transparency here.

How do yields in India compare with other APAC countries?

The residential business has struggled here but we are seeing a revival. The yield here is about 9 per cent in the commercial market, but in mature markets, it is much less, about 3-4 per cent in the US.

The yields in Japan and Australia are also low and it is even lower in Hong Kong at about 2-3 per cent for some of the assets. Global investors who balance yield and safety find India to be safe, transparent and offering better yields.

In terms of segments, retail, office or logistics and warehousing, which is seeing maximum growth?

It is very much logistics. In all emerging markets, as the middle- class grows, they buy more goods, and retail grows. And in this age, you can buy everything online. When you are buying online, sellers need logistical space.

We see logistics as the fastest growing asset class. In the last few years, logistics has been really growing well and it was triggered by e-commerce companies and it is also because of growth in retail and manufacturing.

We are seeing big interest from real estate funds looking at logistics as an area of diversification.

Do you think warehousing will outstrip office space going forward?

Not in the small to medium term as office portfolio is still quite large. But eventually, it is possible.

The percentage growth in warehousing could be higher due to a low base, but in terms of square feet, it will take time as the total corporate grade office space in the seven major cities is close to 600 million sq ft now. Warehousing will be a small percentage of that.

But, eventually, as India will have more retail and manufacturing, it may be more than the office space.

Moreover, people are now straightaway going online to shop and that requires a lot of distribution space.

Among home loans, highest NPAs are in the affordable housing category in India. Is it an alarming situation given that the sub-prime crisis in the US was led by defaulters in the same category?

I think the scale is really small here. It can be worrisome only if it becomes a large part of the market and if loans are given by reducing the threshold. They are still a very small part of the market.

What can make affordable housing work?

The government has to play a part in this. If you live on the outskirts but there is a high speed train to take you to the city centre in 15 minutes, you can build as many affordable homes as possible. And if the government provides physical and social infrastructure, there will be enough private players to do it.