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Why Real Estate is Trumps for the Indian Economy - Red Ribbon Asset Management

Why Real Estate is Trumps for the Indian Economy

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When Donald Trump launched the Trump Tower Pune Project in 2014, he told the assembled press pack (using what we have since come to recognize as his gift for few words), that the Project would be “good for India”. Well, few words or not, it was good for Pune, and the 45th President of the United States (a man who knows a thing or two about real estate) might equally well have been summing up the future of the Indian economy as well: because, as it happens, Real Estate is good for the India too.

And as we move into 2018, all the evidence suggests the subcontinent’s Real Estate Sector is still set fair for the foreseeable future, so that’s good news for the Subcontinent’s Economy well.

Real Estate has now become the second largest employer in India (after agriculture) and it is expected to assume even greater sectoral importance over the coming decade (forecasts produced by the IBEF suggest a dizzy 30%). And no doubt President Trump would be heartened to learn too that in the Global House Price Index India jumped last year by thirteen places to sit at 55th Globally: a consequence of ferocious price competition in the mainstream residential sector on the subcontinent.

And in hard cash terms, the real estate sector is currently expected to generate a staggering  $180 Billion in gross revenues by 2020, which is little short of breathtaking given it already accounts for 6% of India’s GDP.

Private Equity Investment in Indian Real Estate (a key bellwether of economic resilience) grew by 26% last year to a nine year high and direct investment has risen to $7 Billion. Notable participants including South Korea’s Mirae Asset Group, which is planning to expand its Indian operations by investing in excess of $500 Million in commercial leased properties; Canada Pension Plan Investment Board (the Canadian Pension Asset Manager), which has agreed to take a 49% stake in Island Star Mall Developments; and Qatar Holdings LLC (a subsidiary of the Qatar Investment Authority) which has committed to invest $250 Million in the affordable housing fund of Arthveda Fund Management.

Perhaps the most striking feature of that glittering investment roster is that the bulk of the companies involved are not Indian by domicile, which also reflects well on the success of the Modi Government’s FDI Programmes.

And whilst we’re talking of Government, it is pleasing to note too that the significant initiatives announced last year, each designed to stimulate investment in real estate seem now to be bearing real fruit at a local level. Take for example the new public private partnership (PPP) where no less than eight new options have been unveiled by the Ministry of Housing and Urban Affairs to stimulate provision of more and better units in the affordable housing segment; and also in Delhi where the Government has just declared 89 out of 95 villages to be Designated Urban Areas (pursuant to new provisions in this year’s Union Budget) all of which will ease the previously complicated process of land pooling and provide a further boost to the provision of housing in this increasingly overpopulated area.


Red Ribbon CEO, Suchit Punnose said:

Real Estate was the second largest employer in India last year (after agriculture) and over the coming decade it is expected to contribute no less than 30% of Indian GDP. The Sector is proving to be a growing powerhouse for economic growth on the subcontinent, currently forecast to generate $180 Billion in gross revenues by 2020.

Red Ribbon has always placed Indian Real Estate at the heart of its portfolio management strategies and these latest figures fully vindicate that decision. Through diverse projects such as Modulex and Eco Hotels, I am confident that we will continue to harvest the rewards of this exciting sector for many years to come.

All in all, things are looking good for 2018…

Power plant using renewable solar energy with sunset over the Gap in the Himalayan Mountain, Kashmir, India

Embracing the Future: Indian Business Makes Sustainability Matter

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In August this year, former President Barak Obama fiercely criticised his successor’s decision to withdraw from the Paris Climate Accords: he predicted that the decision would inevitably consign the United States to “a small handful of nations that reject the future”. But happily, as in Nature itself, Global Geopolitics abhors a vacuum too and since President Trump announced his decision in August, other nations have been stepping up to the plate by embracing a more sustainable future. And foremost amongst them is India.

This isn’t just a reflection of new environmental policies from Prime Minister Modi’s Government, although there have been plenty of those as well.

According to the Carbon Disclosure Project (a not-for-profit charity that reports on global disclosure protocols for investors looking to manage their environmental impact), Indian businesses are already focusing much more on setting emission reduction strategies and renewable energy targets so as to bring them into line with the Paris Accords. The CDP published its report on 21 October and it shows that out of the 51 Indian companies sampled (43 of which are BSE top 200 companies), no less than 80% have responded to the India Climate Change programme by implementing one or more types of emissions reduction targets and initiatives during 2017.

And that’s not all: 40% of this same sample of leading Indian companies were already implementing strategic commitments to move to renewable energy sources and reduce consumption targets; with three of them (Infosys, Tata Motors and Dalmia Cement) committing to a move to 100% renewable supplies before 2022.

The CDP Report also identifies internal carbon pricing as a significant factor in this seemingly autonomous move within Indian Industry towards Paris compliant targets. Companies on the subcontinent are part of a wholesale trend in adopting internal pricing of carbon as a tool for managing climate risk and they have increased in number from just two in 2015 to eight in 2016 and up to fourteen this year. That is a startling increase of 700% over a three-year period. These companies include some of India’s brightest and best, so their business decisions are certainly not to be taken lightly.

And how is all that likely to reflect on the future Barak Obama was so keen for the World, and Donald Trump, to embrace?

Well, if what’s happening in India at the moment is to be taken as a global model (which it should be), with industry on the ground adhering to macroeconomic policy statements targeted on a greener planet, this will inevitably create a de-carbonization level that is sufficient to keep worldwide temperature increases below two degrees Celsius (according to the same CDP Report). That has to be something worth striving for.

Red Ribbon Asset Management has been committed to the pursuit of environmentally friendly investment policies since the company was founded more than a decade ago; adopting policies that deliver above market rate returns for investors without harming our communities, our wider society or the environment on which we all depend.

Red Ribbon CEO, Suchit Punnose said:

According to the Carbon Disclosure Project, Indian businesses are now focusing much more on setting their emission reduction strategies and renewable energy targets to fall in line with the targets set by the Paris Climate Accords. No less than 80% of fifty-one companies sampled (forty three of which are BSE top 200 companies) have responded to the India Climate Change programme by implementing one or more emissions reduction targets during 2017. It all points to India taking the lead in post Donald Trump, climate change politics and we take a look at what that all means, for India and for our Planet.

Read about the Carbon Disclosure Project here

Read the CDP Report here

Read about the Paris Climate Accords here

Red Ribbon

At Red Ribbon we understand that the transition towards a resilient global economy will be led by well-governed businesses in mainstream markets, striving to reduce the environmental impact of their production processes on society at large and on the environment as well.