It’s the worst nightmare-come-true for thousands of would-be home-owners who sank savings into Jaypee Infratech’s residential schemes. As the company filed for bankruptcy this month, it was uncertain whether they would ever get their long-promised homes or even ever see a rupee of their money again. And anyone driving along the Greater Noida Expressway can easily see how this housing disaster tale could be repeated on a much bigger scale. For miles on both sides of the route stand half-finished highrise apartments guarded by solitary watchmen.

There are fears the Jaypee Infratech story could be played out in different forms around the country. But even as home-buyers watch anxiously, the industry’s displaying a mixed mood. There are on one side the overstretched developers scrambling for funds and who may be squeezed further by tough provisions of the new Real Estate (Regulation and Development) Act known as RERA. But it’s an old maxim that one person’s loss is another's gain.

Opportunity in the debacle

While scores of developers are in big trouble, cash-rich foreign buyers are eyeing India’s real estate sector as a huge opportunity. “India’s in vogue among global real estate owners as of 2017. Two, three years ago when I went on road-shows, the response was apathy, disinterest and even contempt. But things have turned round significantly,” says Arihant Jain of Dasnac Holdings. His company has tied up with Dutch investor Aevitas Property Partners which is investing $30 million to develop properties here.

One estimate by real estate consultancy Jones Lang LaSalle (JLL) is foreign investors — a mix of sovereign wealth funds, pension fund and private equity players — brought $2.9 billion into the real estate market between January and June, up steeply over the same period last year. CBRE, another real estate consultancy, reckons $7 billion will come into the country this year and that should rise to $10 billion by 2020.

There are reasons for the foreign gold rush. For starters, while India’s residential property space is still in the dumps, other market sectors are moving ahead briskly. Sales of office space in cities like Hyderabad, Mumbai and Bengaluru are booming with companies ready to snap up almost anything emerging on the market. Even dependence on the infotech industry is easing, suggesting non-tech companies are expanding or opening up in India in a bigger way.

The star foreign player buying office space at high speed is Blackstone Real Estate which made its Indian market debut in 2007. It’s since played the market like a chess game, deliberating over each move. Now it’s leapfrogged even DLF to become the largest single owner of Indian office space with a portfolio of 30 million sq ft. When Blackstone first came to India, it figured the market was overheated and held back until the 2008 global financial crisis sent prices tumbling. As a result, it was able to purchase high-quality assets. Blackstone has stepped up its buying spree and it’s also in partnership with two big players — the Bengaluru-based Embassy Group and Panchshil Realty in western India.

Embassy Office Parks, backed by partner Blackstone, is also aiming to list what would be India’s first real estate investment trust or REIT expected to raise $600 million from investors. “REITs open up investments for an entirely different class of investor and lead to corporatisation of the market,” says Gagan Randev, national director of Capital Markets & Investment Services at Colliers International.

On the prowl

Other cash-weighty giants are also on the prowl. The powerful Canadian Pension Plan Investment Board or CPPIB has stayed discreetly under the radar but it’s already placed a $1.2-billion bet on IndoSpace that’s developing warehouses and other industrial real estate. Then there’s the Abu Dhabi Investment Authority (ADIA) which has teamed up with an Indian firm and is shopping for retail real estate. There are also several other players like Dutch pension fund APG and Singapore-based GIC which have each invested about $2 billion totally.

As the office space market heats up, the giant players are turning their attention to retail despite the sector’s recent troubled history. Its problems can be traced partly to overbuilding of poor quality malls in the early 2000s. The malls were also hit by e-commerce’s fast-paced growth. Today, however, there are signs of a retail bricks-and-mortar revival and everyone from Blackstone to ADIA is on the lookout for high quality malls in the right locales.

Some players, though, like global investment firm Xander, have focused strongly on the retail sector from the word go. Xander’s retail wing now has 5.5 million sq ft and is slated to open two more malls this year. Another firm, Brookfield, has also invested $2 billion over the last few years.

Even a handful of Chinese firms are entering India with bigger firms like Dalian Wanda negotiating hard for concessions from the Haryana government. Other firms are hunting for the right land parcels quietly and threaten to disrupt the Indian market by completing their entire project before selling a single apartment, says Santosh Pai, a partner at Link Legal India Law Services who has extensive experience advising Chinese investors.

The big carrot

Certainly, the Government played a role in attracting foreign money by its 2015 move allowing 100 per cent FDI in most projects that proved to be a big carrot. Also, the recently introduced RERA promises a measure of market stability. “The implementation of RERA and GST is providing the sector with important reforms and oversight which gives foreign investors much-needed comfort to look at India in a new light,” says Randev.

Ultimately, though, foreign giants are convinced India’s middle-class and sheer population numbers will play in the real estate industry’s favour. Such a belief turns every downturn into a buying opportunity. That said, the residential property market has a long way to go before being out of the woods. One positive sign is that in many markets, the number of units being bought is overtaking the number being built. But the Delhi-NCR region in particular is far from recovery. Still, for deep-pocketed foreign funds, India’s now poised to become a market that’s worth the wait.

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