The fastest growing economy in Asia recently managed to draw the attention of China’s prominent developer, the Dalian Wanda Group, which has signed a memorandum of understanding with the Haryana State Government to develop “Wanda Industrial New City”, to be located in the northern state.

This could be the most significant investment by any Chinese company in the foreseeable future, as the group plans to invest USD 10 billion in the next ten years to construct industrial townships, retail and residential developments. Construction of Phase I of “Wanda Industrial New City” is likely to begin in 2016 and will be spread over 1300 hectares. It will comprise an industrial park that will house companies from various sectors, such as software, automotive manufacturing, machinery, health care, education and other industries. The first phase is anticipated to be completed in the next 3-5 years.

In addition to the Wanda Group, several other Chinese developers are eyeing investment in Indian cities. With foreign investments coming in real estate, we can expect a revival in the currently sluggish land prices, which could trigger a positive wealth effect on business and household spending.It also promises to help solve one of the major challenges Indian developers face: insufficient funding. If the government works in the right direction and delivers on its promises, this trend will encourage more foreign developers to enter India and help strengthen the sector as well as also correct its rather negative image.

Apart from the Chinese, Japanese private equity investors are also looking at entering India’s real estate sector. One of the drivers is likely to be the easing of foreign direct investment restrictions, coupled with the attractive returns that the Indian economy promises compared with mature economies and its peers in the BRICS[1] bloc.

Increased participation by foreign players will also help in the development of quality projects that will benefit end-users and simultaneously create opportunities for Indian investors too. Moreover, Chinese investors who are experiencing a slowdown in their own economy will get an opportunity to benefit from India’s growth story. It will be interesting to observe the implications of Wanda’s strategy and the innovations such foreign players bring to India as they compete with local and well-established players to capitalise on the opportunities that India gives them now.

[1] BRICS – Brazil, Russia, India, China and South Africa

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