The Indian foreign investment policy for the real estate sector through introduction of various liberalisation measures has reinforced the confidence of foreign investors and has helped India regain favour to be one of the preferred investment destinations in the Asia Pacific region.

According to Emerging Trends in Real Estate Asia Pacific 2016 report, jointly published by the Urban Land Institute and PricewaterhouseCoopers (PwC), respondents ranked Bangalore, Mumbai and New Delhi at 12th, 13th and 16th positions for investment prospects and at 15th, 13th and 11th positions for development prospects respectively, in the list of the 22 markets covered in the report.

While there has been a marginal drop in rankings of Mumbai and New Delhi from an investment prospects perspective (they were ranked 11th and 14th, respectively in Emerging Trends in Real Estate Asia Pacific 2015 report), Bangalore has shown a remarkable improvement as it has moved up 5 positions over its last year’s ranking (17th).

The report attributes the surge in Bangalore’s rankings to its technology industry and the availability of a large pool of skilled labour necessary to ramp up the venture capital backed startups.

The report highlights that Mumbai is on a recovery path on the commercial real estate side and, down-town is on stable ground. Delhi and nearby industrial zones have one of the biggest pipelines of new supply in Asia and on the ground, occupancy problems are focused on B-grade or secondary assets rather than the higher-quality buildings, for which the demand remains high. The story in Bangalore is however different than that in Mumbai and Delhi, where even the huge amount of upcoming supply of commercial office inventory is not perceived to be a cause of concern, as it is expected to be matched by an equally high absorption rate.

Outlook positive

Overall, the outlook seems to be positive; this is evidenced by the fact that the 80 per cent of the foreign capital inflows have been all-equity buyouts by big institutional players. Even those investors who had burnt their fingers in the first round of investments in 2006-07, are not wary of Indian markets anymore, and are willing to bet their money once again on the Indian real estate story.

Abhishek Goenka, Partner, PwC India, said, “While Mumbai and New Delhi have marginally dropped in rankings, from an investment prospect perspective, New Delhi ranks second and Mumbai ranks fifth in the buy recommendation rankings for industrial / distribution properties among the 22 cities covered. Furthermore, Mumbai ranks 8th and 9th, respectively, for office and residential buy recommendations. These numbers, in a way, indicate that the investment prospect rankings of these cities could move up and push into the “Top-10” bracket in the years to come.

From a deal structure perspective, while mezzanine financing continues, a shift in the favour of equity structures has occurred, especially in big ticket transactions in commercial assets such as business parks and IT parks,” he added.

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