Investors home in on early-stage housing projects to diversify play

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Mumbai: In the residential real estate sector, institutional investors are adopting a more diversified approach than before, shifting from a focus on late-stage, under-construction, and closer to completion projects to now include even early-stage investments.

Investors now direct a significant portion of their investments toward such early-stage positions, demonstrating their belief in the potential for substantial growth and returns over time. This shift reflects a broader strategy and a deeper confidence in the sector’s long-term prospects, experts said.

This diversified approach is rooted in several key trends and developments within the Indian real estate market. The housing property market has shown remarkable resilience and adaptability amidst varying economic conditions.

“The regulatory environment in India has become more conducive to real estate institutional investments. This, along with the housing property markets’ performance, has instilled confidence among investors, who are now more willing to explore different types of residential projects and stages of development. By spreading their investments across a broader spectrum, they are mitigating risks and tapping into various opportunities that the market presents,” said Boman Irani, president, Credai National.

Reforms such as the implementation of the Real Estate (Regulation and Development) Act (RERA) have enhanced transparency and accountability within the sector. This has reassured investors about the safety and viability of their investments, particularly in early-stage projects, which historically might have been perceived as riskier.
“The residential market is at a pivotal point, supported by affordability, positive consumer sentiment, and a strong regulatory ecosystem. This momentum has led to long-term growth in sales and prices. Public equity markets show strong confidence, with foreign investment and real estate returns performing well. This optimism is now being mirrored in private equity, where residential investments reached a multi-year high in 2024,” said Vivek Rathi, national director, research, Knight Frank India.
A year ago, all investments in the residential segment went into late-stage under-construction projects, but now nearly half of them are going into early-stage projects.
According to Rathi, early-stage, greenfield, and equity-driven deals, largely dominated by domestic investors, underscore the sector’s strength and long-term potential.

These early-stage investments often involve funding projects at the initial phases of planning and development, which can include land acquisition, securing permits, and preliminary construction.

The shift towards early-stage investments signifies a vote of confidence in the fundamental strength and future trajectory of the residential market. Investors are recognising the potential for higher returns by getting involved at the foundational level.