Foreign Investors shift to commercial sector

With home prices dropping in India, foreign investors are now planning to shift their investment from residential market to commercial real estate.

Many of the cities have witnessed a fall of prices in the residential sector. Moreover many unsold residential properties remain in many of the cities without finding any takers. All these factors drive the sentiments of the foreign investors to the commercial sector.

Foreign investors started investing in India in 2005. Up to the last year, residential real estate remained their choice of preference. This was due to many reasons. Liberal rules in the residential market, higher value appreciation of residential properties, etc. are some of them.

Moreover the investment on residential properties is considered more convenient as it offers an easier exit to the investors. Comparatively the chance for exit is very less in the commercial sector. On the other hand the increasing rental appreciation makes commercial sector more attractive.

Among the foreign investors Blackstone Group is a major investor. The private equity major has invested over $500 million in India mostly in the residential sector.

However the private equity major is said to have plans to shift its investment to commercial sector. As a first step, the American firm now plans to buy out special economic zone land in Gurgaon, in the neighborhood of New Delhi.

The estimated investment in the project is $440 million. Bangalore based real estate developer group Embassy will share partnership with the private equity major.

Though the foreign investors are active in India since 2005, most of these investors were investing mainly in the residential sector and not in the commercial sector. Residential sector remained their pick of choice.

Since 2009 the home prices have fallen sharp0ly in the country. Moreover the properties remain unsold without finding any takers. All these lead the foreign investors to shift their investment from residential to commercial sector.

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