With the drop of home prices in many of the top cities, foreign investors now plan to invest in commercial properties in India.
Foreign investors are active in the country since 2005 the year in which they were permitted. However their main investment options remained residential market due to simpler investment norms. Moreover, once the home is finished, the housing sector offered them chances to exit easily with higher returns.
However with surging number of unsold homes in the country, the foreign investors plan to shift to commercial sector now. It is true that the residential market in India is not as vibrant as it was earlier. This would be a reason what prompts them to exit from the housing sector.
Foreign investors including Blackstone Group, now plans to the move on to the commercial sector for their investment, reported Reuters. The sluggish residential is shown as the reason for their shifted interest.
Though the foreign investors are keen to invest in India due to its fast-growing economy, they do not find investment in the residential project as suitable as it was. Home prices have fallen by 5 to 30% since 2009. This fall of home prices prompts foreign investors to look out for other options.
Along with Blackstone Group, other foreign investors like Xander Group and Morgan Stanley are also on their move to shift their investment from residential market to commercial market.
In an interview with the Reuters, Akhil Gupta, Blackstone India’s Chairman, said that the firm has decided to go aggressive in their investment plans. Mr. Gupta added that the group is looking forward to invest more in India in the coming days.
Blackstone Group has already entered into some big deals in India. It is the largest private equity firm which is very active in India. Over the past 18 months, the PE major has invested $500 million in the Indian market.
Partnering with Bangalore-based Embassy group, the group has invested in residential projects in the South India. The group is likely to buy out the special economic zone in Gurgaon in the National Capital region. The estimated cost of the project is $440 million.
Commercial market offers the investors steady rentals. However it hardly provides an easy exit. Sot they feel more oriented to commercial property market than the volatile housing segment.