India’s Rapidly Evolving Real Estate Industry
The Program in Real Estate is proud to have a diverse composition of students hailing from global markets across five continents. Emerging markets continue to prevail as an area of intense interest shared by many involved with the Program. Underscoring the international focus of many students in the program was the recent Cornell Real Estate Conference (CREC) themed The Wide World of Real Estate Globalization of Investment and Development. Panelists from the conference as well as the first-hand perspective from Kanika Saxena (PRE ’13) offer unique insights into the rapidly evolving real estate market in India.
Kanika is a first year student and one of four students from India currently in the PRE. Before coming to Ithaca this fall, she worked and lived in Delhi, India. Highlighting that the residential real estate market is quickly improving in India, she reflected that, “a deeper cultural shift towards the nuclear family unit and respective living arrangements is taking place in India, and it is increasing the demand for proper housing units all over the country.”
New supply of housing units, as well as better access to capital in order to acquire an independent living unit, has enabled younger generations the freedom to move out of their parent’s home and become more independent. However, mortgages in India remain very expensive relative to housing-related debt in other, more developed countries. Today, mortgage debts only accounts for a very small proportion of GDP - roughly six percent – and India is yet to develop a secondary securitization market for this types of debt. Conversely, in the U.S., mortgage debt as a proportion of GDP peaked at roughly 75 percent in 2008 and still hovers around 65 percent today.
Future opportunities for the Indian real estate industry revolve around developing adequate workforce housing to satisfy the unmet demand for residential units in many of India’s rapidly growing markets like Ahmedabad, Bangalore and Chennai – three of the fastest growing cities in the world. Opportunities for development across other assets classes are readily available – global hotel brands from Accor to Marriott are bolstering their presence in the country by thousands upon thousands of new rooms each year.
A benefit, highlighted by both Kanika and panelists at the CREC, is the increasing regulation in the Indian real estate industry. This augmented regulation is increasing both transparency and certainty for transactions, which will create opportunities for REITs and other real estate investment vehicles in the near term.
The most prevalent challenges for development in the Indian market include inflation and the dearth of high-quality public infrastructure. Even in India’s major cities, reliable roads, electricity, potable water and waste management remain looming concerns and costly impediments to many development projects.
Members of both the “International Investing” and “Development and Construction Abroad” panels reiterated that India remains an emerging market with significant upside potential. However, the importance of a savvy local partner than can help navigate the nuances of the Indian market is paramount to increasing the likelihood of a successful outcome.
Each year, highly trained students graduate from the Program in Real Estate and return to India. By applying their education and experiences from Cornell and events like the CREC, it is clear that the next generation of sophisticated Indian real estate leaders are in our midst.