‘Reforms to Drive Investments in Realty’
Recent government initiatives such as RERA, the implementation of GST, REIT and demonetisation to have a positive ‘trickle down’ effect on the Indian property sector, says CBRE’s Calvin Frese, Jr.
The government’s recent policy initiatives are expected to drive higher foreign investments in India, and attract foreign as well as prominent national players across leading sectors such as food manufacturing, retail, high-tech and civil aviation. This may result in a boost in demand for real estate across all segments including office, retail, hospitality and logistics, Calvin Frese, Jr, global group president, geographies and Steven Swerdlow, CEO-Asia Pacific, CBRE, told Kailash Babar, in an exclusive interaction. Edited excerpts:
Indian real estate is going through a lot of regulatory developments such as the Real Estate Regulatory Act. How do you perceive this from foreign investors’ context? Calvin Frese, Jr.: Over the past year, the Indian government has launched a number of policy initiatives including the implementation of the Real Estate Regulator Act (RERA), the proposed implementation of the Goods and Services Tax (GST), REIT (Real Estate Investment Trust) and the recent demonetisation drive. All of these are towards creating a conducive and transparent environment for attracting both consumers and investors back to the real estate segment.
Last year, the government also relaxed foreign direct investment (FDI) norms across various sectors, thereby pronouncing India as the ‘most open economy’. In our view, all these steps taken by the government to facilitate investment are likely to have a positive ‘trickle down’ effect on the country’s property sector. We are already seeing the positive effects of this on the office, retail and logistics market. Last year, the office market continued its positive growth momentum recording a record absorption of 43 million sq ft across key cities.
Before attaining maturity, what sort of transformation Indian property market will have to go through in the next few years? What are the changes that you would like to see? Steven Swerdlow: India’s real estate market is extremely dynamic and there’s a lot of potential for further growth and development. While a lot has already been done to provide the necessary thrust to the sector, implementation of these various initiatives is key to the future growth of the sector. The various policy announcements, key infrastructure development plans across cities, smart cities mission, ‘Housing for All’ by 2022, GST and REITs are paving the way for India to have a more open and investorfriendly economy. This is the first step towards becoming a mature market.
With REITs getting approval, would India emerge as a hot property market for global investors? Steven Swerdlow: The most recent amendments to the REITs’ guidelines cover various aspects and are likely to encourage a more REIT-friendly environment. The main focus is on minimising risk, increasing transparency, boosting RE investment, raising equitable autonomy between various stakeholders, along with allowing for higher REIT portfolio diversification. At CBRE, what will be your focus area going forward? What are the future growth plans for India? Calvin Frese, Jr.: We continue to be focused on building brand CBRE, not just in India but across the region. Our presence in the country for over two decades, large client base has ensured that we are the leading real estate consultant here. Going forward, we plan to cement our leadership position. India’s organised retail market presents a huge $75 billion opportunity for retailers, and therefore, we have launched a comprehensive strategic retail business advisory service to cater to the ever-evolving needs of organised retailers.
With this new offering, CBRE becomes the only property consultancy to provide business plan advisory to retailers in India. This is in addition to the already existing retail advisory and transaction services.
How is the Indian property market placed in the current international scenario with respect to pricing and investment transactions? Calvin Frese, Jr.: Real estate continues to be an attractive investment option for both domestic and international investors. While there are some regulatory gaps in certain aspects, overall, real estate in India is a segment that still provides the best long-term return on investment. In the office segment, competitive leasing or capital prices, lower cost of operations and availability of skilled manpower make India a preferred outsourcing hub. The same can be said of the retail segment. The increase in the number of global brands considering India for setting up of operations signifies the positive dynamics of the sector. With the recent relaxation in FDI norms, and REIT, India’s investment market is also becoming popular for foreign funds across real estate segments.