(Feb 11): India’s real estate developers are turning to capital markets to raise funds, signalling their confidence that the shift of millions of people toward cities will ensure robust demand.
More than half a dozen companies are lining up for initial public offerings this year that may raise nearly US$3.3 billion. That compares with 291 billion rupees in IPO proceeds for the property industry, including developers, co-working space providers and REITs, in the past 10 years combined, according to data compiled by Bloomberg.
“The growing demand in Indian real estate IPOs reflects a sector that has matured,” said Ranvir Davda, co-head of investment banking at HSBC India. “Improved transparency, stronger governance and sustained demand are making investors more comfortable backing listed platforms to fund growth and build scale.”
Urban migration in the world’s most populous nation is expected to drive demand for nearly US$906 billion of new housing by 2034, according to Invest India, a government agency. The country’s rise as a global technology hub has fuelled demand across commercial real estate, including office and retail developments, with special economic zones and IT parks playing a key role in supporting the sector, it said.
The wave of property companies heading to the market is headlined by Bangalore-based RMZ Corp, one of India’s largest developers, which is considering an IPO that may raise as much as US$1 billion. Mumbai-based K Raheja Corp is weighing a listing that may fetch up to US$700 million. Shapoorji Pallonji Group has hired bankers for a potential IPO of its real estate business that may raise about US$880 million, local media reported.
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Global investors including Blackstone Inc, Brookfield Asset Management, GIC Private Ltd, Abu Dhabi Investment Authority and Canada Pension Plan Investment Board have already made large bets on India’s property market.
Property companies are contemplating listings even as real estate stocks have underperformed over the past year. The Nifty Realty Index has fallen about 2% over the last 12 months, compared with gains of more than 12% for the benchmark Nifty 50 Index.
Still, investor appetite has turned positive on the rising awareness of diversification benefits and increasingly predictable cash flows, according to Amrendra Singh, head of equity capital markets at SBI Capital Markets Ltd.
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“Real estate companies are tapping the capital markets to fund growth,” Singh said. “Residential demand has surged amid rapid urbanisation while commercial real estate has strengthened with the expansion of global capability centres, data centres and warehousing assets.”
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