Investing in India - Real Estate
Content
Investing in India The Next Bastion of Global Investments
Presented by:
Transinnova
May 2012
Investing in India ____________________________________________________________________________ Introduction The Indian Economy continues to show stellar growth in the face a deteriorating world economy. For the past three years, India has remained one of the three fastest growing economies in the world with a growth rate of over 8 percent. According to a recent KPMG article, India will persist in enjoying its 8 to 10 percent phenomenal growth for at least the next 10 years. Besides other market sectors, the Indian real estate sector is still one of the fastest growing compared to other developing countries. This is mainly due to relocation expansion of international corporations into India, creating jobs and increasing the demand for both residential and commercial real estate. Foreign corporations are viewing the South-Asian nation as a strategic hub for their operations and investments. This is primarily due to India's investor-friendly policy environment, positive eco-systems, and its huge potential for growth. There are several factors supporting India’s economic growth. They include ● Population - a huge population base of over 1 billion ● India’s knowledge base - India’s strong educational system (both at the school and university level) have convinced numerous multinational corporations to invest in the Indian subcontinent ● Language - a growing English-speaking population ● Resources - India has an abundance of natural resources ● Economy - India’s still undervalued and underdeveloped economy offers investors numerous investment opportunities in various market sectors ● Policies - India’s policies have come a long way in making its markets more favorable to the foreign investors ● Banking - India’s banking system is robust, well developed and conservative ● Judicial - India has a strong and independent judicial system Thirty five of India's market sectors have attracted foreign investors. These investments, called Foreign Direct Investments (FDI) can be made by a foreign individual, a foreign company or any other foreign entity. FDI is a movement of capital across national frontiers in a way that an investor acquires a controlling position. FDI into the Indian market sectors is growing at an aggressive rate. The cumulative flows of capital for April-November 2011 aggregated to US$ 22.83 billion, exceeding the total FDI of US$ 19.43 billion for 2010-11 fiscal year. Some examples of recent FDIs into India: ● Energy: Sterlite Grid - US$ 228.48 million ● Healthcare: NSR Direct PE Mauritius, LLC - US$ 231 million ● Finance: Equitas Micro Finance - US$ 45.83 million ● Hospitality: New York-based Chatwal Hotels & Resorts LLC - US$ 200 million ● Automobiles: German luxury car maker Mercedes-Benz - US$ 199 million ● Real Estate: Blackstone Capital - US$200 million
Besides the growing economy, investors have a number of reasons to invest in India: 1. Gross Domestic Product (GDP) - India's GDP is currently US$1.3 trillion, making it the 8th largest economy in the world. However, in PPP terms, which recognizes India's low cost base, the GDP notionally rises to three times this amount (US$3.8 trillion) which places it on a similar size to Japan and, by 2013, it will become the third largest economy in the world (after the USA and China) in PPP terms. 2. Investment Diversity - The Indian economy offers investors exposure to a wide range of opportunities from consumer goods and pharmaceuticals to infrastructure, energy, agriculture, and real estate. India is particularly strong in the services sector (50% of India's economy), particularly in knowledge-based services (IT, software and business services). 3. Demographics - India is one of the youngest countries in the world, with an average age of 25 years. With a population of 1.2 billion, a strong work ethic, high levels of education, democracy, English language skills and an entrepreneurial culture, India is poised to dominate the global economy over the next 20 years. 4. High Savings - With a savings rate of 37% of GDP, India's domestic savings fuels most of its investment requirements, and only 20% of India's total public debt is sourced from foreign borrowing. With significant investment to be made in upgrading India's poor infrastructure in the next 10 years (estimated to be US$1.7 trillion), India's Government is taking various steps to further encourage private and foreign investments. 5. Strong Domestic Economy - India's domestic consumption, generally led by the private sector, has played a significant role in India's growth and is expected to remain firm as more people enter the workforce and the emerging middle classes. Every sector within India's consumer markets is booming, making India far less vulnerable to external shocks and pressures than other emerging markets. Types of High-Growth Investment Opportunities in India 1. Real Estate: townships, commercial office buildings, malls, residential - condominiums, townhouses, villas, and affordable housing 2. Energy: This includes traditional sources like thermal and hyro, and renewable energy sources like wind, solar, and biomass. 3. Hospitality: hotels, spas, timeshare, resorts, etc. Reference of the Following Information - Overseas Indian Facilitation Centre Real estate emerged as the popular sector for private equity (PE) funds, which witnessed investments worth US$ 1,700 million in the sector during 2011. PE in real estate projects will fetch considerable returns by next year-end or early 2013, says Vikram Hosangady, partner, KPMG. "Limited partners (who write checks for funds) expect 15-25% returns from real estate deals. Foreign investors are optimistic about India. All they want is prompt action and friendly policies," he says.
In fact, during January-May 2011, the sector witnessing various PE and M&A deals, according to research firm Venture Intelligence. Around 20 deals worth US$ 1.3 billion took place during the period, as compared to 22 deals worth US$ 483 million last year. Some of the major deals during the period included Jeff Morgan Capital's investment of US$ 320 million in Compact Disc India's film city project, Warburg Pincus' investment of US$ 318 million in Oceanus Real Estate and Ascendas India's investment of US$ 190 million in Phoenix infocity. Tata Realty also invested US$ 86 million in Peepul Tree Properties along with around US$ 65 million flowing to Archean Group, Chennai from a PE investor. According to major research firm forecasts, the sector would continue to witnessing growing investments. ● According to the ULI-PricewaterhouseCoopers (PwC) report titled 'Emerging trends in Real Estate ® Asia Pacific 2011', which surveys comments from 150 industry leaders across the Asia Pacific region, India leads the pack of top real estate investment markets in Asia for 2010. ● The report forecasts that India will continue to maintain a GDP growth momentum of 910 percent by 2015 as the country will witness new private equity in capital markets which will inject capital in infrastructure projects. As per the Worldwide Quality of Living survey 2010 brought out by HR major, Mercer Consulting, for 221 cities globally, Bengaluru continues to remain the best placed among Indian cities in the global list at 140th rank this year, improving from its last year ranking of 142. Bengaluru has once again emerged as the best Indian city in terms of the quality of living for expatriates.
Future Outlook / Comments by the Experts Morgan Stanley - anticipates that India could attract FDI worth as much as US$ 80 billion in next 1-2 years. Price Waterhouse Coopers - India’s property market is booming. They recently estimated that as much as US $8 billion dollars of private investment will flow into India over the next 12 months. Goldman Sachs - “India is set to be the third largest economy in the world by 2050” Merrill Lynch - “The Indian real estate sector was worth $12 billion in 2006. This will rise to a massive $90 billion by 2015” Jones Lang LaSalle - “Government estimates a housing shortfall of over 20 million homes” Fortune Magazine - “Property Prices in India are rising fast”
For more information, contact David Faria, Ph.D. at....... [email protected]
Presented by:
Transinnova
May 2012
Investing in India ____________________________________________________________________________ Introduction The Indian Economy continues to show stellar growth in the face a deteriorating world economy. For the past three years, India has remained one of the three fastest growing economies in the world with a growth rate of over 8 percent. According to a recent KPMG article, India will persist in enjoying its 8 to 10 percent phenomenal growth for at least the next 10 years. Besides other market sectors, the Indian real estate sector is still one of the fastest growing compared to other developing countries. This is mainly due to relocation expansion of international corporations into India, creating jobs and increasing the demand for both residential and commercial real estate. Foreign corporations are viewing the South-Asian nation as a strategic hub for their operations and investments. This is primarily due to India's investor-friendly policy environment, positive eco-systems, and its huge potential for growth. There are several factors supporting India’s economic growth. They include ● Population - a huge population base of over 1 billion ● India’s knowledge base - India’s strong educational system (both at the school and university level) have convinced numerous multinational corporations to invest in the Indian subcontinent ● Language - a growing English-speaking population ● Resources - India has an abundance of natural resources ● Economy - India’s still undervalued and underdeveloped economy offers investors numerous investment opportunities in various market sectors ● Policies - India’s policies have come a long way in making its markets more favorable to the foreign investors ● Banking - India’s banking system is robust, well developed and conservative ● Judicial - India has a strong and independent judicial system Thirty five of India's market sectors have attracted foreign investors. These investments, called Foreign Direct Investments (FDI) can be made by a foreign individual, a foreign company or any other foreign entity. FDI is a movement of capital across national frontiers in a way that an investor acquires a controlling position. FDI into the Indian market sectors is growing at an aggressive rate. The cumulative flows of capital for April-November 2011 aggregated to US$ 22.83 billion, exceeding the total FDI of US$ 19.43 billion for 2010-11 fiscal year. Some examples of recent FDIs into India: ● Energy: Sterlite Grid - US$ 228.48 million ● Healthcare: NSR Direct PE Mauritius, LLC - US$ 231 million ● Finance: Equitas Micro Finance - US$ 45.83 million ● Hospitality: New York-based Chatwal Hotels & Resorts LLC - US$ 200 million ● Automobiles: German luxury car maker Mercedes-Benz - US$ 199 million ● Real Estate: Blackstone Capital - US$200 million
Besides the growing economy, investors have a number of reasons to invest in India: 1. Gross Domestic Product (GDP) - India's GDP is currently US$1.3 trillion, making it the 8th largest economy in the world. However, in PPP terms, which recognizes India's low cost base, the GDP notionally rises to three times this amount (US$3.8 trillion) which places it on a similar size to Japan and, by 2013, it will become the third largest economy in the world (after the USA and China) in PPP terms. 2. Investment Diversity - The Indian economy offers investors exposure to a wide range of opportunities from consumer goods and pharmaceuticals to infrastructure, energy, agriculture, and real estate. India is particularly strong in the services sector (50% of India's economy), particularly in knowledge-based services (IT, software and business services). 3. Demographics - India is one of the youngest countries in the world, with an average age of 25 years. With a population of 1.2 billion, a strong work ethic, high levels of education, democracy, English language skills and an entrepreneurial culture, India is poised to dominate the global economy over the next 20 years. 4. High Savings - With a savings rate of 37% of GDP, India's domestic savings fuels most of its investment requirements, and only 20% of India's total public debt is sourced from foreign borrowing. With significant investment to be made in upgrading India's poor infrastructure in the next 10 years (estimated to be US$1.7 trillion), India's Government is taking various steps to further encourage private and foreign investments. 5. Strong Domestic Economy - India's domestic consumption, generally led by the private sector, has played a significant role in India's growth and is expected to remain firm as more people enter the workforce and the emerging middle classes. Every sector within India's consumer markets is booming, making India far less vulnerable to external shocks and pressures than other emerging markets. Types of High-Growth Investment Opportunities in India 1. Real Estate: townships, commercial office buildings, malls, residential - condominiums, townhouses, villas, and affordable housing 2. Energy: This includes traditional sources like thermal and hyro, and renewable energy sources like wind, solar, and biomass. 3. Hospitality: hotels, spas, timeshare, resorts, etc. Reference of the Following Information - Overseas Indian Facilitation Centre Real estate emerged as the popular sector for private equity (PE) funds, which witnessed investments worth US$ 1,700 million in the sector during 2011. PE in real estate projects will fetch considerable returns by next year-end or early 2013, says Vikram Hosangady, partner, KPMG. "Limited partners (who write checks for funds) expect 15-25% returns from real estate deals. Foreign investors are optimistic about India. All they want is prompt action and friendly policies," he says.
In fact, during January-May 2011, the sector witnessing various PE and M&A deals, according to research firm Venture Intelligence. Around 20 deals worth US$ 1.3 billion took place during the period, as compared to 22 deals worth US$ 483 million last year. Some of the major deals during the period included Jeff Morgan Capital's investment of US$ 320 million in Compact Disc India's film city project, Warburg Pincus' investment of US$ 318 million in Oceanus Real Estate and Ascendas India's investment of US$ 190 million in Phoenix infocity. Tata Realty also invested US$ 86 million in Peepul Tree Properties along with around US$ 65 million flowing to Archean Group, Chennai from a PE investor. According to major research firm forecasts, the sector would continue to witnessing growing investments. ● According to the ULI-PricewaterhouseCoopers (PwC) report titled 'Emerging trends in Real Estate ® Asia Pacific 2011', which surveys comments from 150 industry leaders across the Asia Pacific region, India leads the pack of top real estate investment markets in Asia for 2010. ● The report forecasts that India will continue to maintain a GDP growth momentum of 910 percent by 2015 as the country will witness new private equity in capital markets which will inject capital in infrastructure projects. As per the Worldwide Quality of Living survey 2010 brought out by HR major, Mercer Consulting, for 221 cities globally, Bengaluru continues to remain the best placed among Indian cities in the global list at 140th rank this year, improving from its last year ranking of 142. Bengaluru has once again emerged as the best Indian city in terms of the quality of living for expatriates.
Future Outlook / Comments by the Experts Morgan Stanley - anticipates that India could attract FDI worth as much as US$ 80 billion in next 1-2 years. Price Waterhouse Coopers - India’s property market is booming. They recently estimated that as much as US $8 billion dollars of private investment will flow into India over the next 12 months. Goldman Sachs - “India is set to be the third largest economy in the world by 2050” Merrill Lynch - “The Indian real estate sector was worth $12 billion in 2006. This will rise to a massive $90 billion by 2015” Jones Lang LaSalle - “Government estimates a housing shortfall of over 20 million homes” Fortune Magazine - “Property Prices in India are rising fast”
For more information, contact David Faria, Ph.D. at....... [email protected]
