Construction Industry News
The current market size of the real estate sector in India is 265.18 billion rupees and looking at the growth that the sector is currently experiencing, it is likely to reach 828.75 billion dollars by 2028. This This estimate is supported by India's economic resilience, which makes the country one of the most favorable investment destinations. Amid the global recession, the Indian real estate sector offered an alternative that will not only balance the volatility of the stock market but is also set to generate higher valuation in the long run.
While new opportunities are emerging in this vibrant market, driven by growing demand, the sector has also faced a number of challenges, mobilization of organized funds being one of them. Amidst this situation, Alternative Investment Funds (AIFs) are slowly but surely establishing their footprint, offsetting obstacles with new opportunities. With solid growth on the horizon, AIFs have already raised around Rs 8 trillion through March 2023, already representing 30% growth over the last year. With growing demand for residential and commercial projects, AIFs will enable developers to translate ideas into action and help them fully realize the development potential in the country's key markets. The Indian real estate sector is expected to attract approximately $6 billion in private equity investments by the end of 2023 and for this FIA, this is a viable source to gain the trust of investors. This will expedite postponed projects and enable developers to acquire more land and launch projects in line with desired expansion plans. India is witnessing major developments in infrastructure, and this will have a direct impact on real estate development. But FIAs will speed up the entire process, creating more space for the real estate sector.
Not long ago, real estate investing came with many warning signs. Investors did not have much confidence in it because the entire investment process was cumbersome and intertwined with operational red tape, documentation and asset management complexity. FIAs have eliminated all these negative aspects and today real estate is the most sought after investment vehicle, especially for HNIs and UHNIs. AIFs are highly trusted as these funds are regulated by SEBI. Furthermore, AIFs have many advantages in terms of governance, portfolio diversification, tax-efficient structures and hassle-free investment experience. Additionally, AIFs offer the opportunity to diversify as these funds focus on commercial, retail, storage and even the growing data center segments.
AIFs, which are very active in the commercial segment, are benefiting from the success of the office segment, emerging asset classes such as coworking and the retail segment. With 3 active Real Estate Investment Trusts (REITs), which also qualify as AIFs, investors can focus on income-producing assets without directly owning or managing the properties. These types of investments also help HNIs and UHNIs maximize their risk-adjusted returns by participating in private markets. From a sector growth perspective, these funds provide much-needed cash flow to continue driving growth momentum.
With India emerging as a lucrative alternative manufacturing destination, many global manufacturers are shifting their base to India as part of their China+ strategy. This gives a big boost to the storage segment, making it one of the most promising real estate asset classes. Alternative investment funds (AIFs), especially real estate investment trusts (REITs), offer investors new opportunities to take advantage of the growth of the storage sector. Many domestic and international investors invest in warehouses and industrial properties and immediately reap the benefits of diversification and attractive returns.
Looking at these developments, it can rightly be concluded that AIFs are not only reinforcing the impressive growth story of the sector, but are also providing an overall structure for real estate financing, creating a more mature investment ecosystem. As the real estate sector continues to raise the bar, AIFs will make this growth sustainable by hitting the right nerve of prosperity and value creation.
