Rakesh Jhunjhunwala, a billionaire investor, wants Indian real estate developers to focus on the inexpensive housing sector, keeping a watchful eye on the cost of affordable homes.
“Return on capital for listed developers is six-seven percent. Steps need to be taken to increase the return on capital,” Jhunjhunwala remarked on February 17 at a Confederation of Indian Industry (CII) event. He also sees a lot of potential for real estate investment trusts (REITs) in India, pointing out that the units of three REITs that are listed on local stock markets have been favourably embraced by the investing community.
Jhunjhunwala believes in commercial real estate as well. According to him, the logistics industry is in its infancy and is highly appealing.
Consolidation in the real estate sector, the distinction between landowners and property developers, low-interest rates on home loans, and the expectation of increased employment in the service sector, according to the billionaire investor, are some of the key triggers for the Indian real estate sector.
“If India has to develop, real estate has to develop,” he asserted. The country’s real estate sector has gained impetus in the recent year, with a rise in demand for housing units. Housing costs are also rising. According to the CII-ANAROCK Consumer Survey – H2 2021, around 56% of respondents predict house prices to grow in 2022 as a result of inflationary tendencies in building raw materials and overall operating costs for developers.
The study, which took place between July and December 2021, interviewed 5,210 people from tier 1, tier 2, and tier 3 cities using various digital channels.
The housing industry in India has greatly improved after the enactment of the Real Estate Regulation and Development Act. However, the regulatory environment must change further in order for the real estate sector to thrive. “Government of India should digitize the land record and certificate of the title should be done digitally,” Jhunjhunwala remarked.
The investor urged developers approaching the capital market to seek cash through initial public offerings to be aware of the capital they have raised, the reason for which it has been raised, and the type of return that may be delivered on such capital. “Do not make promises you cannot keep,” he advised developers.