The RE sector opened for foreign investment in 2005 and was flushed with capital, given the exuberant pre-GFC environment. Post GFC (late 2008), while the physical markets took a hit, the drop was short-lived. Residential markets re-bounded handsomely and demand for capital pushed returns to 20%+ for debt like investments.
This attracted newer players, initially those with real-estate investing-lending expertise, but later even non-focused lenders entered the credit play for real estate. Cheap and easy liquidity from NBFCs-HFCs aided this buildout further. All of it came to a grinding halt, upon the IL&FS debacle in Sep 2018, and credit access to several NBFCs and HFCs froze. Since the onset of credit crisis, global opportunistic funds like Oaktree, Farallon, Bain Capital, SSG ARES etc. have allocated US$2bn+ for purchasing loan books from NBFCs.
The demand for housing in India is structural, driven by demographic and social trends. The COVID pandemic led disruption has led to a premium on home ownership, even as last 7 years were characterized by several disruptive events (demonetization, RERA, GST, NBFC credit crises and finally COVID). We believe that this down cycle has bottomed out and is now on an upswing. Strong macro fundamentals like increasing affordability, record-low interest rates, high end-user demand supplemented by improving physical real estate markets have continued to support investment into the residential sector.
