How Indian Real Estate industry is gaining from integration of property & Financial Markets

India’s real estate industry is going through a metamorphosis – it is transforming into a more transparent, competitive and accessible real estate market. The past few months have witnessed clarity in the regulatory environment, FDI and growth of private equity and demand for high quality real estate.

Over the years, the industry has seen a marked emergence of more institutional investors, leading to substantial infusion of capital, including PE and FDI in real estate. For instance, during the past 10 years, an estimated USD 15 billion was invested in the real estate sector by way of PE capital alone. Though it still has to come up to the levels of markets in Australia, Singapore, UK and America, Indian real estate industry is fast adopting global standards and processes. Today, many cities apart from Delhi & Mumbai such as Hyderabad, Pune and Chennai are leading in terms of availability of market intelligence and quality of real estate development.

With the government showing serious intent and purpose in pursuing reforms, easier availability and accessibility of reliable information in areas such as financial reporting, property taxation, planning regulations is required. A stronger focus should also be directed on the provisions that govern the application of tax and building codes, licensing, permissions, land purchase, development activities, leasing, and land titles. Enforceability of contract and land registry information should be made more consistent across cities. Transacting in property and putting it up for lease, sublease, mortgage and other purposes should be made simpler and more efficient.

The impending notification of the Real Estate Regulatory Bill and proposed modifications to the new land acquisition law are expected to help resolve many of these issues. The recent relaxation of FDI norms is particularly welcome as it will certainly help the industry become better organized and transparent. Similarly, the launch of REITs will enable the industry to tap into structured, institutional sources of funding. Being publicly traded investible units, they will nudge real estate companies to move away from private to public financing, bolster the concept of public ownership, and provide the framework for real estate companies to become more transparent and better managed.

As we move closer to another new year, many of the above-mentioned steps and anticipated measures will push India’s real estate industry to flourish. But more than the new rules and regulations, it will be their implementation and execution that will hold the key to ensuring that the industry benefits from these reforms. If the standing and new measures are implemented purposefully and if compliance to the rules is made more stringent, the real estate sector in India is destined to grow from strength to strength.

About P. Sahel

As Vice Chairman of Lotus Greens, Sahel is responsible for giving directions on overall business strategy and key investments decisions of the firm. Being one of the founding members of Lotus Greens, Sahel has been instrumental in formulating various company policies, setting up systems and processes, and building a strong team of professionals. Prior to Lotus Greens, Sahel worked for more than 16 years in some of India’s largest and most respected real estate companies like Jones Lang LaSalle for 13 years as the Managing Director of the Markets & Solution Development and DLF prior to that. The views expressed are personal

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