Determinants of foreign and domestic non-listed real estate funds flow in India: An ARDL Approach

Traditionally in India, real estate development was funded by High Net-worth Individuals (HNIs) through high-cost debt and equity. The opening of Foreign Direct Investment (FDI) in real estate in 2005, made non-listed real estate funds (NREFs) an important source of capital for Indian real estate development. During 2005 to 2015 foreign NREFs contributed more than three fourth (3/4th) of entire NREFs investment in the country. Foreign NREFs significantly contributed to increase transparency and corporate governance in Indian real estate sector. However, in times of volatility, especially after the global financial crisis of 2008 foreign NREFs became conservative. Domestic NREFs were the major investors in the market during this period. NREFs investment in real estate is impacted by the macroeconomic environment of the host country. Most of the literature focuses on the drivers of foreign investment and there is hardly any literature on domestic investment drivers. This study, in contrast, simultaneously evaluates the domestic and foreign NREFs drivers. Unlike many other Asian countries (like China, Singapore and Hong Kong) very limited previous research is available in Indian real estate.This study will examine macroeconomic and capital market factors (like inflation, currency risk, interest rate volatility, M3, BSE realty index, BSE Sensex and GDP) to determine the drivers of domestic and foreign NREFs flow in the Indian real estate sector during 2005 to 2017. This study will use secondary data from various sources including published reports and data on various macroeconomic, capital market and NREFs investment data (from World Bank, IMF, RBI, OECD, VCC Edge, etc.). Overall, this paper will evaluate the significant determinants of NREFs flow in Indian real estate.