Most estimates have forecast that the Indian real estate sector will get $7-10 billion of foreign direct investment (FDI) over the next three years. A recently published Trammell Crow Meghraj (TCM) report, Accelerating transformation: Investments in Indian Real Estate, however, says that given the number of funds already operational and others that are planning to enter the country, the figure might be as high as $15 billion.The report notes that 100-120 India-specific global and domestic real estate funds are already active in various stages — planning, setting up, or in investment mode — and many more funds are at the evaluation stage. About 50-60 per cent of them (100-120 funds) are “active” funds, which means they have operations on the ground in India, actively looking out for investment opportunities, and may even have closed a few deals.The average corpus of each India-specific fund is $250-300 million. As for domestic real estate funds, many have already committed their first fund corpus, either in part or full, and are now in the process of raising capital for the next phase of their fund. The survey adds that the second corpus now being raised is typically much larger than the first.Another finding of the survey is that the transaction cycle for funds in India is typically longer than the cycle in mature markets. It attributes this to the greater time required for evaluating deals, fixing valuations (given today’s buoyant market conditions), and completing the due diligence of land, the project, and the potential partner.What has also emerged from the survey is that the activities of real estate funds are not confined only to Tier-I cities. Despite having been active only for a year, many funds have acquired the confidence to venture into Tier-II and Tier-III cities. The reason: the high prices in Tier 1 cities and the opportunities in smaller ones.Says TCM Knowledge Centre head T Chakrabarti, “While many headline-making numbers have been spoken about in the past, this survey goes beyond and tries to decipher the fine print of the dynamics shaping the investment scenario in the Indian real estate sector.”
