Real Estate Market of India Loses Foreign Investors

India's Real Estate Market: An Uninviting Destination for Global Investors

real estate investment

High Costs Deter Investment

  • High land prices and property costs have made India's real estate market unfavorable for investment.
  • According to the Royal Institution of Chartered Surveyors (RICS), the current market situation in India falls short of global standards.

Decreasing Foreign Investment

  • Recent research indicates a decline in the number of foreign investors in the Indian real estate market.
  • Foreign investors are exercising caution when considering investments in India.

Expert Insights

  • Sean Tompkins, CEO of RICS, highlighted that India's real estate market has failed to meet global standards since 2005.
  • The Economic Times quoted Mr. Tompkins, emphasizing that India is no longer an attractive destination for real estate investors.

Historical Context: Investments and Exits

  • Between 2006 and 2009, approximately $20 billion was invested in India's real estate market.
  • Only $2-3 billion of this investment successfully exited, while the remaining amount (invested for almost 6 years) has yet to yield an appreciable return.

Challenges Facing Investors

  • Increased Land Prices: Narrowing profit margins for investors.
  • Higher Buyer Resistance: Further reducing investor returns.

Consequences for Private Equity Firms

  • Decreased Returns: Prompting firms to exit, yet struggling to do so with substantial returns.
  • Loss of Leadership Positions: Heads of Private Equity firms have lost their positions due to failed investment schemes.
  • Cautious Investment Strategies: Firms are now approaching investments with increased caution.
  • Incapability to Exit: Despite the desire to exit, many Private Equity firms remain unable to do so.

Path Forward for India's Real Estate Market

  • Creating Favorable Conditions: Essential for attracting investors back to the market.
  • Reforms and Global Standards: India must implement reforms and treat real estate and construction as recognized professions to attain global standards, as seen in Western countries.
  • Opinion of Mr. Tompkins: Emphasizing the need for India to adapt to global real estate standards to revive its attractiveness for investors.