In the first half of FY25, India's real estate sector emerged as the top beneficiary of Alternative Investment Funds (AIFs), attracting INR 75,468 crore, or 17% of total AIF investments. This marks a 10% rise from FY24. Additionally, the sector raised INR 12,801 crore through Qualified Institutional Placements (QIPs), reinforcing investor confidence driven by strong demand and declining unsold inventory. A growing reliance on Category II AIFs, including real estate funds and private equity, underscores their transformative role in reshaping the sector. With foreign and domestic investors boosting capital, AIFs play a crucial role in shaping India's urban infrastructure.
The real estate sector has become the leading beneficiary of Alternative Investment Funds (AIFs) in the first half of FY25, attracting a substantial INR 75,468 crore, which represents 17% of the total INR 4,49,384 crore AIF investments across all sectors, according to SEBI data compiled by Anarock. This marks a 10% increase from INR 68,540 crore at the close of FY24.
In addition to AIFs, the sector raised INR 12,801 crore through Qualified Institutional Placements (QIPs) during the same period, accounting for another 17% of total investments. These figures highlight strong investor confidence in India's real estate market, driven by increasing demand and decreasing unsold inventory in major cities.
The sector's performance was further supported by a growing reliance on equity financing, particularly through Category II AIFs, which encompass real estate funds, private equity, and debt funds. Over the last five years, Category II AIFs have accounted for nearly 80% of total AIF commitments, demonstrating their flexibility and customized investment strategies.
Foreign Portfolio Investors (FPIs) have also increased their participation in Category II AIFs, matching domestic investors in funding key real estate projects.
Mr. Prashant Sharma, President of NAREDCO Maharashtra, highlighted the pivotal role of AIFs in bridging critical funding gaps in the real estate sector. "The record INR 75,468 crore invested in real estate through AIFs in H1 FY25 underscores the sector's resilience and growth potential. With robust sales in major cities and a consistent decline in unsold inventory, investors recognize the sector's long-term value. AIFs are not just funding projects; they are shaping the future of urban infrastructure and housing in India."
Adding to this, Mr. Kuldeep Jain, Founder and CEO of Build Capital, emphasized the role of AIFs in transforming the real estate investment landscape. "The growing reliance on Category II AIFs highlights their transformative role in reshaping the real estate sector. These investment vehicles not only channel significant capital into the industry but also bring in-depth expertise in partnering with reputed developers, ensuring strategic asset selection and prime location analysis, and achieving timely financial closure. This comprehensive approach not only facilitates project completion and delivery but also drives higher and secured returns for investors. By addressing the increasing demand for housing and urban infrastructure, AIFs reaffirm real estate as a preferred asset class for institutional investors, combining stability with consistent value creation to enhance its long-term investment appeal."
As per Anarock data, more than 1.36 million units have been launched in the top seven cities between 2021 and end-September 2024. Concurrently, about 1.44 million housing units have been sold in these cities year-to-date. Strong demand led to a more than 10% decline in unsold housing inventory in this period, despite the high rate of supply addition. These trends are a testament to the sector's growing appeal to institutional investors.
The consistent rise in AIF commitments, supported by both domestic and foreign investors, is expected to further fuel the growth of India's real estate sector. As developers tap into these resources to meet rising housing demand and infrastructure needs, the sector is poised to maintain its dominant position in the investment landscape. With innovative funding mechanisms like AIFs leading the charge, real estate is set to remain a cornerstone of India's economic growth story.
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