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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

By | INDIA, News | No Comments

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…

Consumer spending as an engine for Growth

By | INDIA, News | One Comment

India is currently the fastest growing large economy in the world, which is one of the reasons why projects with their roots in the subcontinent are at the heart of Red Ribbon’s Mainstream Impact Investment Strategies, just as they were when the company was founded more than a decade ago. But what are the key drivers of this explosive growth; what is it that makes India one of the most important Growth Markets in the world and what does all that mean for the future?

Well, for a start demographic trends and the resulting rapid shifts in consumer demand patterns are undoubtedly contributing to the phenomenon.

India has the fastest growing population in the world; increasingly urbanised and sophisticated in its tastes and with burgeoning disposable income levels to match. The resulting escalation in demand is being targeted in particular on social media and technology sectors where according to the Government sponsored India Brand Equity Foundation, spending is projected to double by 2025.

And bear in mind also that these trends are by no means coming off a cold start. By the end of 2016, India had already hit a ten-year high in consumer spending, standing first in a group of sixty-three leading nations surveyed in the Global Consumer Confidence Index. Seventy percent of respondents on the subcontinent responded to this survey by saying that the next twelve months would be a good time for them to buy consumer goods.

The Indian Consumer Sector grew at an annual rate of 5.7% between 2005 and 2015. Compare that with the 12% year on year growth it is experiencing now: and if things continue at the current rate, India will be the third largest consumer market in the world by 2025. By way of only one example, smartphone sales in India are projected to grow by 15% (to 125 Million) during the course of 2017 alone.

Major multinationals have not been slow to spot the trend:

  • Amazon India has set up seven new warehouses this year, which will exclusively provide logistical support for its campaign to boost sales of high-end consumer products and the global behemoth is also planning to enter the Indian food retailing sector by investing US$ 515 million over the next five years;
  • Dyson, the UK-based manufacturer, has plans to enter the Indian consumer market during 2017 and is investing GBP 154 million (US$ 190 million) over the next five years in retail infrastructure.

Prime Minister Modi’s Government is also playing a part in these trends through a policy of 100% Foreign Direct Investment (FDI) relief for online retail goods and services  There is no sign that the pace of change in the consumer sector is likely to slow down anytime soon.

Red Ribbon Asset Management has long recognized the importance of India as the single most significant Growth Market in the World. The subcontinent sits at the very heart of its investment policies, combining above market rate returns for its investors whilst at the same time offering unique opportunities to further the company’s innovative Mainstream Impact Investment Strategies.

Read about the India Brand Equity Foundation here: https://www.ibef.org/

Read about the Global Consumer Confidence Index here: https://data.oecd.org/leadind/consumer-confidence-index-cci.htm

Read the details of India’s FDI Scheme here: dipp.nic.in/foreign-direct-investment/foreign-direct-investment-policy

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.

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