India will require Investment of USD 1 trillion over a period of next 5-7 years to meet the Infrastructure and housing demand and main source of the funding is expected to come from NBFCs (Non-Banking Financial Corporations) and private equity, said a joint report of PwC-NAREDCO-APREA.
According to the joint report, about 70-80% of the demand for investment will be from housing and the remaining is projected from Smart City projects, Infra-linked real Estate projects like airports, railways and urban transport and the development of industrial corridors.
The report titled ‘Building the Economy Block by Block’ said, banks, private equity, NBFCs and REITs (Real Estate Investment Trusts) are likely to be the major sources for financing infrastructure projects in the country.
“There has been a significant increase in lending from NBFCs to the real Estate Sector in last few years. There are number of domestic and foreign owned NBFCs specialising in lending to the real estate sector and currently their investment is more than Rs 1.1 trillion in this sector,” the report said.
Private equity as a source of funding has gained increasing success in the real estate sector over the years, it added.
The report observed, Constant percentage of banks’ commercial real estate credit to total credit over the years is an indicator of the lack of intent on the part of banking institutions to increase their exposure in the real estate sector development hence making it necessary for developers to explore other sources for financing.
“With greater transparency owing to government policies and initiatives transforming the sector to a dynamic and organised market, has boosted the investor confidence leading to such results,” the report said.
Abhishek Goenka, Partner -Tax, PwC India, said, “The Real Estate (Regulation and Development) Act, 2016 along with the PPP initiatives such as the Hybrid Annuity Model that are better suiting the risk appetite for long term investors are proving vital to the sector’s revival.”
He further added, “REITs and Infrastructure Investment Trusts (InvITs) are investment vehicles that can be used to attract private investment in the infrastructure and real estate sectors, and also relieve the burden on formal banking institutions.”
It seems, as investment inflow in the country in housing projects and infrastructure projects like Smart City projects, airports, railways, urban transport and development of industrial corridors, it will create a huge demand of construction equipment in the country during this period. The investment will further help the Indian construction equipment industry which is already started getting back on its feet due to rising infrastructure activities in the country.
Therefore equipment like backhoe loaders, excavators, cranes, Tippers and other Earthmoving and material handling machinery will see the sizeable demand.
Source: Information has been obtained from a joint report of PwC-NAREDCO-APREA