Far from being normal and formulaic, real estate markets have always been in motion. Real estate is a prominent asset class in household, institutional, government, and private company portfolios. In this policy brief, we examine the recent movements and trends in the real estate industry and the ancillary fields that are affected by it. Notable shifts include an increase in the rent-toprice ratio for residential real estate and an improvement in optimism among REIT analysts despite deteriorating fundamentals.
Over the decade, the value of real estate has increased at a rate that has outpaced both GDP growth and gold's appreciation. The price-to-book ratios of commercial complexes and construction material firms have risen significantly, while those of the housing finance and construction firms have slowed. Foreign investors are showing more interest in private equity real estate projects. Mortgage REITs and listed residential mortgage-backed securities are the potential next big things. The Research and Policy Insights on Financial Markets and Economy series aims to provide operationally relevant perspectives from research in a concise and cohesive manner.
The real estate sector in India is being recognised as an infrastructure service that is driving the economic growth engine of the country. In fact, foreign direct investment (FDI) in the sector is expected to increase to US$ 25 billion in the next 10 years, from present US$ 4 billion, according to a latest industry body report. There are various developments and elevations which are taking place in the real estate sector. Non-resident Indians and Persons of Indian Origin (PIO) are allowed to purchase immoveable property in India. Residential property prices have stabilized now and are deemed attractive for the NRI home buyer. Industry experts feel that with attractive pricing and innovation in construction technology and variety of designs, NRIs are taking a fresh look at India as a unique market in which they can invest. The real estate in India is the second most favoured destination for FDI and the country has attracted three times the foreign investment in the past years.