Credit: GRI Club Is India the Next Commercial Real Estate Powerhouse?
Key takeaways from industry leaders at India GRI - New York Edition 2024
June 18, 2024Real Estate
Written by Isabella Toledo
GRI Club recently hosted the India GRI - New York Edition event for the first time. The meetings took place at the New York Marriott Downtown in NYC, and the agenda included technical visits to innovative projects in New York City, engaging social activities, closed-door debates, and matchmaking initiatives.
The conference day opened with the main session, “Emerging Markets Outlook,” led by Richard Barkham, Global Chief Economist at CBRE, and moderated by Gustavo Favaron, CEO & Managing Partner of GRI Club. Ben Brown, Managing Partner and Head of the Americas & Global Head of Office at Brookfield Properties, and Manoj Menda, Chairman of the Supervisory Board at RMZ Corporation in India, joined the discussion to explore future predictions amid the global economic landscape, focusing on developing countries.
To kick off the debate, several factors currently shaping the global economy were highlighted. First, the economic stimulus injected by the United States government to revitalise domestic production post-pandemic, equivalent to 18% of GDP. The pandemic landscape of the past four years, combined with changes in the country's policies, has made public investment challenging. For instance, during World War II, the stimulus was about 40% of GDP.
It’s worth mentioning that the US recorded its highest inflation rate in 41 years, reaching 9.1% in the 12 months ending in June 2022. The country is still dealing with the economic consequences of this inflation: interest rates are currently between 5.25% and 5.50%, the highest level in about 22 years.
According to Richard Barkham, the market anticipated four or five interest rate cuts in 2024: "We won't get that," he lamented. Nonetheless, there is an expectation of a "soft landing" for the national economy, with inflation remaining around 3% throughout the year and nearing 2% by the end of 2025.
Another important factor in the equation is the Eurozone, which is showing stronger-than-expected growth thanks to economic stimuli similar to those in the US. The region is expected to have the lowest inflation rates among major markets, ending the year at 2%, with projections of further decreases by the end of 2025. The outlook for the European Central Bank's (ECB) to lead interest cuts was proven accurate following its cut in June.
A third factor mentioned is China. Facing challenges in the housing sector, China has implemented fiscal stimuli and interest rate cuts to revitalise the economy. These efforts have shown positive results, contributing to the country's economic growth in 2023 (5.2%), despite a volatile market. "Beyond the soft landing in the United States, it's about a recovery in growth in China," Barkham noted.
The projections also consider geopolitical tensions, such as the war in Ukraine, which have China and Russia aligning against developed markets, and the technological war between China and the United States.
The office market in India is bustling with tenant demand and regulatory changes that are opening up more opportunities. Unlike North America, India has a rapidly growing demand for office space, driven by a robust economy and a favourable business environment.
Currently, the net absorption of office space in India reaches around 40 million square feet per year, a significant increase from a decade ago. It is estimated that this figure could reach more than 100 million square feet in the coming years.
The Indian residential real estate market also shows significant potential. With a structural undersupply of housing, particularly institutionally developed rental housing, there is a substantial opportunity for growth. The demographic trends and urbanisation in India create a strong demand for various housing types, including luxury, which 70% of current developments are focused on.
The Indian market also faces a significant challenge with approximately $929 billion of refinancing coming up in 2024. This enormous financial requirement could lead to some smaller banks facing difficulties, particularly those heavily exposed to debt. However, larger banks are expected to remain stable and resilient.
These limitations, however, have not hindered India's economic ascent. The country boasts annual growth rates of around 6% and is predicted to become the third-largest economy in the world within five to six years.
Beyond the major cities, so-called tier-two cities are starting to see growth in residential, retail, and hospitality properties, signalling a broader expansion of real estate beyond the main metropolises.
With around $4 billion currently invested in real estate, India aims to increase this to $20 billion in the coming years. Today, the domestic capital market is strong, offering good multiples and access to local currency, making domestic investment more attractive for developers. Foreign investment is expected to grow in the coming years as the Indian market continues to evolve and become more liquid.
All this activity is happening amidst disruptions to traditional cycles. The shift of supply chains from China to India has greatly benefited the Indian market. However, growing urbanisation demands that urban and social infrastructure keep pace with real estate development.
To keep up with the developing situation going forward, India GRI returns to Mumbai in October for its 16th edition, gathering top CEOs, directors, and senior executives from across the country to engage in high-level industry discussions and unique networking opportunities in an exclusive environment.
Attendees will engage in topics like credit flows, capital allocation, multifamily, logistics, ESG, offices, equity, and debt. With dedicated spaces for private meetings and matchmaking, India GRI 2024 will foster valuable connections and partnerships.
Don’t miss the most influential event in the Indian real estate market! Click here to learn more and secure your seat.
GRI Club recently hosted the India GRI - New York Edition event for the first time. The meetings took place at the New York Marriott Downtown in NYC, and the agenda included technical visits to innovative projects in New York City, engaging social activities, closed-door debates, and matchmaking initiatives.
The conference day opened with the main session, “Emerging Markets Outlook,” led by Richard Barkham, Global Chief Economist at CBRE, and moderated by Gustavo Favaron, CEO & Managing Partner of GRI Club. Ben Brown, Managing Partner and Head of the Americas & Global Head of Office at Brookfield Properties, and Manoj Menda, Chairman of the Supervisory Board at RMZ Corporation in India, joined the discussion to explore future predictions amid the global economic landscape, focusing on developing countries.
Global Economic Outlook
"The trend is a decline in inflation across all regions," was the encouraging message delivered by Richard Barkham during the opening session of the conference. He emphasised the expectation that interest rates will decrease more rapidly in this scenario.To kick off the debate, several factors currently shaping the global economy were highlighted. First, the economic stimulus injected by the United States government to revitalise domestic production post-pandemic, equivalent to 18% of GDP. The pandemic landscape of the past four years, combined with changes in the country's policies, has made public investment challenging. For instance, during World War II, the stimulus was about 40% of GDP.
It’s worth mentioning that the US recorded its highest inflation rate in 41 years, reaching 9.1% in the 12 months ending in June 2022. The country is still dealing with the economic consequences of this inflation: interest rates are currently between 5.25% and 5.50%, the highest level in about 22 years.
According to Richard Barkham, the market anticipated four or five interest rate cuts in 2024: "We won't get that," he lamented. Nonetheless, there is an expectation of a "soft landing" for the national economy, with inflation remaining around 3% throughout the year and nearing 2% by the end of 2025.
Another important factor in the equation is the Eurozone, which is showing stronger-than-expected growth thanks to economic stimuli similar to those in the US. The region is expected to have the lowest inflation rates among major markets, ending the year at 2%, with projections of further decreases by the end of 2025. The outlook for the European Central Bank's (ECB) to lead interest cuts was proven accurate following its cut in June.
A third factor mentioned is China. Facing challenges in the housing sector, China has implemented fiscal stimuli and interest rate cuts to revitalise the economy. These efforts have shown positive results, contributing to the country's economic growth in 2023 (5.2%), despite a volatile market. "Beyond the soft landing in the United States, it's about a recovery in growth in China," Barkham noted.
The projections also consider geopolitical tensions, such as the war in Ukraine, which have China and Russia aligning against developed markets, and the technological war between China and the United States.
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Office & Residential Opportunities
The discussion also explored the performance of office spaces, suggesting a promising future for this asset class in emerging markets. According to one participant, there will be a trend of outsourcing service sector activities from the US to countries like India, which "is taking China's place and becoming the dominant market."The office market in India is bustling with tenant demand and regulatory changes that are opening up more opportunities. Unlike North America, India has a rapidly growing demand for office space, driven by a robust economy and a favourable business environment.
Currently, the net absorption of office space in India reaches around 40 million square feet per year, a significant increase from a decade ago. It is estimated that this figure could reach more than 100 million square feet in the coming years.
The Indian residential real estate market also shows significant potential. With a structural undersupply of housing, particularly institutionally developed rental housing, there is a substantial opportunity for growth. The demographic trends and urbanisation in India create a strong demand for various housing types, including luxury, which 70% of current developments are focused on.
Indian Investment Interest
It’s important to note that the Indian real estate market has a relatively low volume of international investors. Domestic capital still plays a significant role. Some Japanese funds are beginning to show interest, but the market still lacks substantial foreign capital.The Indian market also faces a significant challenge with approximately $929 billion of refinancing coming up in 2024. This enormous financial requirement could lead to some smaller banks facing difficulties, particularly those heavily exposed to debt. However, larger banks are expected to remain stable and resilient.
These limitations, however, have not hindered India's economic ascent. The country boasts annual growth rates of around 6% and is predicted to become the third-largest economy in the world within five to six years.
Beyond the major cities, so-called tier-two cities are starting to see growth in residential, retail, and hospitality properties, signalling a broader expansion of real estate beyond the main metropolises.
With around $4 billion currently invested in real estate, India aims to increase this to $20 billion in the coming years. Today, the domestic capital market is strong, offering good multiples and access to local currency, making domestic investment more attractive for developers. Foreign investment is expected to grow in the coming years as the Indian market continues to evolve and become more liquid.
All this activity is happening amidst disruptions to traditional cycles. The shift of supply chains from China to India has greatly benefited the Indian market. However, growing urbanisation demands that urban and social infrastructure keep pace with real estate development.
To keep up with the developing situation going forward, India GRI returns to Mumbai in October for its 16th edition, gathering top CEOs, directors, and senior executives from across the country to engage in high-level industry discussions and unique networking opportunities in an exclusive environment.
Attendees will engage in topics like credit flows, capital allocation, multifamily, logistics, ESG, offices, equity, and debt. With dedicated spaces for private meetings and matchmaking, India GRI 2024 will foster valuable connections and partnerships.
Don’t miss the most influential event in the Indian real estate market! Click here to learn more and secure your seat.
