India's real estate IPOs double, raising ₹13,500 cr by Oct 2024

Echoing strong momentum in the Indian real estate market, the year 2024 has so far seen 7 real estate initial public offerings (IPOs) with capital worth ₹13,500 crore raised, nearly double from 2023, the BSE data shows.

In the previous year, the industry saw five real estate IPOs, raising a total of ₹6,900 crore from the capital market.

Riding on the overall positive sentiments, 123 fresh issues (October 20, 2024), including both mainboard IPOs and SME IPOs, across multiple sectors have hit the market in 2024 so far, surpassing the total number of 120 IPOs in 2023.

Real estate, which contributes around 7.3% to India’s GDP, saw a marked uptick in IPO activity. Since 2021, the bourses have witnessed 21 real estate IPOs, higher than 11 in the previous four years, during 2017-2020.

"In the post-pandemic era, 21 real estate companies have raised ₹31,900 crore through IPOs, over double the funds raised in the preceding four-year period (2017-2020)," says data released by investment management firm Colliers.

The data shows that traction in real estate IPOs is largely led by housing finance institutions, which attracted 46% of the capital raised during 2021-2024, followed by REITs at 22% share. Leading real estate developers with a primary focus on residential assets of ₹5,600 crore, over 10X compared to the preceding four-year period.

In its sector outlook, Colliers says IPOs by real estate developers, HFCs, and REITs with underlying assets such as Grade A offices and malls are likely to see "continued momentum" in the near-mid-term on strong demand across residential, commercial, and retail segments.

HFCs have seen a 46% increase in funds raised at ₹14,690 crore, followed by REITs with 22% growth at ₹7,000 crore and real estate developers with 17% growth at ₹5,550 crore.

The expectation of a probable reduction in the lending rates can further boost real estate activity. “Since 2021, housing finance companies have formed a majority proportion of the IPOs within the domain of real estate at 46%. This was followed by REITs at 22% and real estate developers at 17% who have accessed the primary market. The positive outlook for IPO activity in India is underpinned by higher investment in infrastructure, favourable demographics, and higher consumer spending supported by a conducive regulatory framework,” says Badal Yagnik, CEO, Colliers India.

In recent years, real estate IPOs on the stock exchanges have not only grown in volume but have also diversified into newer categories. Leading flex space operators have been expanding portfolios across cities and expediting IPO plans. In the near to medium term, several enterprises including flex operators, and small and medium REIT (SM-REIT) have already queued up for IPOs with the regulator.

Vimal Nadar, senior director & head of research, Colliers India, says at over 30% gains, the year-to-date performance of the BSE Realty Index has outpaced the Sensex. "Over 90% of the real estate IPOs listed in the ongoing year have been oversubscribed, an indication of positive markets sentiment and investor confidence in the sector."