“The Time for Change is Now”: India Real Estate Beyond the Bubble

By April 3, 2018INDIA, News
Real Estate India - Red Ribbon Asset Management

Western Economists react sceptically to any suggestion of a model for sustainable economic growth, reverting typically to Keynes’ maxim that most “markets can stay irrational for longer than you can stay solvent”. And certainly since the financial meltdowns of 2008, markets across the globe have grown increasingly accustomed to short-term investment strategies, often with the single default of Government Bonds as a buffer against turbulent trading cycles. “Most markets” that is… except for India. Because the subcontinent has been bucking this trend for at least the last five years, and in the process it has created a new paradigm for sustainable and resilient economic growth.

Take, for example, India’s Real Estate Markets.

According to this year’s CREDAI Report (the highly influential barometer for trends in real estate globally) property investment on the subcontinent is set to increase from an already strong base to at least USD 180 Billion by 2020, with new funding for domestic housing making up 47% of that total and expected to double by the same year. These projections and underlying rates of growth are wholly atypical of worldwide property markets, but the sheer consistency in performance of Indian markets over recent years suggests investors would be well advised to look now to the subcontinent for the type of longer term solutions that are increasingly unavailable in more developed economies.

And you don’t have to look far to find the reasons for why CREDAI’s growth projections point to sustainable growth as well.

India’s vastly improved regulatory climate, for example, has helped sustain progressively increased demand for domestic and commercial properties, matching the needs of the subcontinent’s growing and increasingly urbanised population with a parallel relaxation on the historic fetters which have tended to act as a brake on development. Added to that there is now a much more fertile fiscal environment as well, primarily  as a result of measures introduced by Prime Minister Modi’s Government such as the much heralded RERA initiative which is expected to consolidate current trends by eliminating some of India’s more unscrupulous development activities as well as, of course, the new Goods and Sales Tax (“GST”) which is expected to result in a reduction in global development costs of up to 4%.

Recent relaxations in FDI restrictions have also provided an enormous boost for foreign investment, most notably a sharp increase in Private Equity participation in the real estate sector. The CREDAI Report notes that “Private equity investments in real estate increased by 12% year-on-year across 79 transactions in 2017.”

And the Report itself concludes with something of an understatement: “The time for change is now…Game changing developments like RERA and GST have created a strong base for the sector to grow and coupled with India’s strong economic advancement they have provided a perfect spring board for investment in Indian Property.”

The Red Ribbon Real Estate Fund offers a unique opportunity to participate in the enormous potential of India’s Property Markets, with the benefit of unrivalled expertise from the company’s team of experts operating in all key segments and informed by a network of more than a hundred analysts and advisers working every day in India’s pivotal areas of expansion. The Fund was launched last year so as to make the most of the opportunities offered by these explosive trends for growth in India’s property sector. The aftershocks of the Bubble experienced by western property markets in 2008 is now a distant afterthought for the subcontinent.

Red Ribbon CEO, Suchit Punnose said:

As the Article points out, Red Ribbon’s Real Estate Fund was listed last year to make the most of explosive growth trends in Indian Real Estate markets, and with the benefit of our expert teams working both in the subcontinent and at our head office in Mayfair, we are in an unrivalled position to calibrate just where and why the best opportunities for above market rate returns are likely to be found. Red Ribbon has placed India at the heart of its investment activities for more than a decade now, and we are proud of the accumulated knowledge this has given us: particularly in key areas such as the commercial and domestic real estate segments.

This store of accumulated knowledge confirms too the sustainable character of the current trends for growth in both segments as confirmed by the CEDRAI report, so I can only concur with the Report’s conclusion that the time to invest is now. And especially so with the radically improved regulatory and legal measures now in force in India, creating a commercial climate that has never been more conducive for successful investment, aided of course too by the key fiscal initiative introduced by Prime Minister Modi’s Government.

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