Research

India Capital Markets:
The Real Estate Perspective

May 14, 2020

We are living through a watershed year in human history, with the unimaginable scope and scale of COVID-19 having changed our standard grasp over ‘business as usual’ forever. Amid the ongoing global pandemic and its unforeseeable effects on the economy, investments in India’s real estate sector are likely to face unique  challenges ahead.

India attracted institutional investments of USD 4.3 billion in its real estate sector during the financial year 2019-20 (April 2019 to March 2020), which was lower by 13% over the previous financial year. This decline was mainly due to the sharp decline in investments during the January–March 2020 period, when the pandemic started to spread, forcing the country to adopt lockdown measures to contain the disease.

58% decline in investments during Jan – Mar 2020 YoY

Although the current environment is extremely uncertain and unpredictable, what one can say for sure is that a return to normalcy would be contingent upon the time it takes to contain the pandemic. We have, nevertheless, attempted to note all that has happened in the Indian real estate space over last few quarters, including how investors, bankers as well as policy makers perceive the current situation. We have also observed certain trends that may unfold during the course of this momentous year: 2020.

Key themes
  1. Investments in FY 2019-20 lowest in four years, declining by 13% to USD 4,261 million
  2. Investments declined by 58% Y-o-Y during January–March 2020 due COVID-19 impact
  3. Mumbai, Pune and Bengaluru cornered two-thirds of investment pie
  4. Large opportunistic deals cornered 84% of total investments
  5. Banks changed lending stance to real estate developers post NBFC crisis
  6. Banking sector expected to play pivotal role in reviving economic growth
  7. COVID-19 and falling crude prices likely to impact select Sovereign Wealth Fund investments
  8. Caution and risk aversion expected to drive investment behaviour over next few quarters
  9. Last mile funding opportunity may be pursued by most investors
  10. Office space, followed by warehousing, could witness return of investments

The recovery of the global economy from the current pandemic will hinge upon the capital infused to drive growth and, hence, recovery in investments is a question of time. Year 2020 will be one of redemption, as the world recovers from one of its darkest hours in recent history.

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