The Challenges of Private Real Estate in India – January 2016

by Bi Xuan Lim

  • 05 Jan 2016
  • RE

Global investors have traditionally been subjected to restrictions in the Indian real estate market. As a result, private real estate investors and private real estate funds interested in India tend to be local participants. However, this may be about to change with the Modi government’s recent move to lift various restrictions on foreign investment in properties and real estate development projects.

Another way to examine the impact of India’s unfavourable rules to foreign investment is by looking at the composition of private real estate fund managers that target the country. Preqin’s Real Estate Online tracks 93 private real estate funds that have closed since 2006 that are solely focused on investments in India; these funds have collectively raised $19.9bn in aggregate capital commitments. Three-quarters of these funds are managed by India-based managers, including all funds closed since 2012. Considering the higher risk of investments in Indian real estate, it is unsurprising that 81% of funds closed since 2006 have followed an opportunistic approach.

There are 31 India-focused funds currently in market targeting $6.2bn in aggregate capital commitments. Of these funds, only 10% are being raised by managers headquartered outside of India. However, foreign investments in India’s development projects will no longer be limited by land size and a minimum capitalization as of November 2015, which is likely to increase India’s attractiveness to investors.

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