India’s real estate sector has witnessed a significant surge in capital raising, amassing over ₹1 lakh crore in the past 19-20 months. This remarkable figure, largely driven by debt issuances, underscores the sector’s robust growth and improved creditworthiness, bolstered by a booming housing market and steady cash flows.
According to data from Prime Database, real estate and civil construction companies in 2023 and 2024 have raised ₹95,975 crore through debt, with ₹61,600 crore secured in 2023 and ₹34,375 crore in the current year to date. In contrast, equity issuances have remained relatively modest, though there has been a notable uptick in 2024. Equity fundraising, which amounted to just ₹124 crore in 2023, has surged to ₹8,772 crore this year, driven primarily by initial public offerings (IPOs).
Looking ahead, another ₹28,350 crore worth of issuances are in the pipeline, including ₹16,635 crore in debt, ₹9,695 crore through Qualified Institutional Placements (QIPs), and the remainder via IPOs.The sector’s fundraising prowess is largely attributed to the improved predictability and stability of cash flows, particularly in the residential segment. A spokesperson from Equirus Investment Banking highlighted that developers often receive payments on a milestone basis, which has significantly enhanced cash flows.
This financial stability has enabled real estate companies to secure debt financing at competitive rates, particularly for those with credit ratings of ‘A’ and above. Despite the increase in equity issuances in 2024, debt remains the preferred avenue for fundraising due to its cost-effectiveness. Real estate investors typically seek returns in the higher teens, while debt is available at rates ranging from 10 to 12 per cent. This cost differential has made debt financing more attractive, leading to a lower reliance on equity.
The funds raised are being strategically deployed for construction financing, land acquisition, and maintaining the momentum of new project launches. In the first half of 2024 alone, there were 54 land deals covering over 1,000 acres, while 2023 witnessed nearly 100 land deals encompassing over 2,700 acres, according to Anarock, a real estate consultancy. Moreover, larger, listed real estate players are increasingly acquiring projects or land from smaller, unlisted entities, often developing these assets independently or through joint ventures. Real estate platforms backed by strategic investors have also gained popularity, with companies raising funds through QIPs and preferential issues from public market investors.
The sector’s strong fundamentals are reflected in its financial performance, with an average revenue growth of 15 per cent in the March quarter and 13 per cent in the June quarter of 2024. Net profit growth was even more impressive, rising by 37 per cent and 54 per cent, respectively, during these periods. As India’s real estate market continues to thrive, the sector’s ability to raise substantial capital, coupled with its strategic deployment, is likely to drive further growth and consolidation, positioning it strongly for the future.
