India’s real estate sector is driven by strong institutional investor confidence and evolving market dynamics. The Government’s efforts to improve transparency in real estate transactions have bolstered investor confidence with domestic institutions particularly through Real Estate Investment Trusts (REITs). Qualified Institutional Placements (QIPs) raised $2.7 billion, reinforcing real estate’s growing role in India’s capital market. The residential sector has emerged as an outstanding performer, attracting more than U.S. $ 4 billion across 49 deals, which is a four-fold increase over the previous year. In 2024, REITs have seen their investments touching nearly $800 million, while foreign institutional investors dominated the sector with a 63% share of total investments reaching an all time high of $8.9 billion. Equity investments continued to flourish, accounting for 78% of total realty investments. Policy reforms and infrastructure investments have played a pivotal role in attracting sustainable investments in this sector. Strong growth, political stability and attractive investment opportunities have positioned India favourably in the global economic context.

The market regulator, Securities and Exchange Board of India, last month prohibited foreign portfolio investors (FPIs) from issuing Offshore Derivative Instruments (ODIs). These are called participatory notes (P-Notes) that have derivatives as the underlying assets. SEBI has also prohibited FPIs from hedging their P-notes with derivative positions on Indian stock exchanges. This change would increase the costs of holding such assets. Some investors who have large exposures and prefer to remain anonymous may trim their holdings. The circular of the regulator has been issued to curb regulatory arbitrage and enhance transparency in the ODI market. Earlier SEBI had also mandated that all FPIs investing in direct equity in India should maintain a list of beneficial owners of the funds and assets. Consequently, SEBI has now instructed FPIs that are issuing P-notes to obtain ownership data of all investors holding such instruments.

: According to independent agencies, India’s $254 billion technology outsourcing industry will continue to show positive trends though the rate of growth may be muted due to global political uncertainties. It is expected that the Indian IT industry will post better results in 2024-25 and Indian service providers are likely to outperform on account of a better macro environment and accelerated GenAI adoption globally. The opportunities lie in large sized transformation deals. The consulting business is likely to grow at the normal rate. More jobs are also likely to be created during the next fiscal year and for this, Indian talent is in great demand. Therefore, venture capitalists are bullish on investing in Indian startups especially in those which are in the application-layer artificial intelligence space. In 2024, $747 million was raised by Indian AI startups. In addition to the application-layer, analysts believe that the opportunity is in the infrastructure layer space. There are broadly three layers in the artificial intelligence stack, namely, the foundational models, horizontal layers called enablers, and vertical AI applications. AI startups are expected to follow the trend set by software companies which mostly build for U.S. customers. These startups are aiming to capitalize on the prospects emerging from large corporations which are looking to make their databases suitable for artificial intelligence. As a result, most new AI startups are focusing on consumer and enterprise applications.

The writer is a practising lawyer, specialising in corporate and tax laws of India.