 "'Capital-starved real estate offers significant investment opportunities'")
The capital-starved residential real estate segment has significant opportunities to offer, said industry experts at the IVCA Conclave 2025.
Kalpesh Mehta, founder of Tribeca Developers, said, "If you look at any other sub-sectors of real estate, whether it is office, data centres, or retail, there is plenty of equity money coming into these sub-sectors. Residential still does not have equity capital coming in. And I think if one is to look at the opportunity from an investment standpoint, doing equity in residential, I believe, is a much better opportunity currently compared to investing in an office-level project or a data centre project."
Mehta believes that the Real Estate Regulatory Authority (Rera) has "cleaned up" the sector substantially and that there is an incredible opportunity in the segment, but not enough people are tapping into it.
The capital-intensive residential real estate segment accounts for the largest share, about 75-80 per cent, compared to any other commercial real estate segment in the industry.
Real estate investments accounted for approximately 14 per cent of all alternate capital investments in the last ten years, amounting to $56 billion. The Indian real estate sector has seen a remarkable 65 per cent increase in land transaction volumes in 2024, indicating strong investor confidence and a robust market environment.
Sharad Mittal, founder and chief executive officer (CEO) of Arnya Real Estates Fund Advisor, stated that the lack of capital is "by the regulation or by the structure of the capital market."
Sonu Jalan, managing partner, Kotak Real Estate Fund, said, "Eighty per cent of value creation happens in residential. Very unique in terms of what we look at globally. Asians, and particularly Indians, we like to own more."
He pointed out that the sales value of the residential segment in the last calendar year was over $80 billion, against $8 billion in commercial real estate.
"That (lack of capital) is the reason developers have been creative in terms of generating self-capital—whether it is in the form of land collaboration, in day-to-day operations, or just calling up friends and families in the US and getting some capital. That is how they are probably building most of their development," Jalan added.
However, Vipul Roongta, managing director and CEO at HDFC Capital Advisors, said, "More people have lost money investing in the residential sector as investors than those who have made money, due to plenty of reasons. But yes, opportunity is there."
Industry experts are also banking on potential growth in segments like hospitality, data centres, warehouses, and rental housing.
Mehta said, "There are almost no studio apartments when virtually all of the demand is for that. The biggest reason why this asset was not built was that yields in residential were 2.5-3 per cent, and the cost of debt was 7-9 per cent, which just does not make sense."
"But what we are now seeing is that this is emerging. And we are actually able to build these units to give an 8-10 per cent yield. I see an explosion of this asset class as a new category coming in," he added.
Meanwhile, industry leaders stated that the sector is on the "right path." "We feel a little more confident. The market is a little more disciplined. It seems like we are on a stable path," Jalan said.