India will need about USD 4.5 trillion worth of infrastructure investments till 2040, with an estimated investment shortfall of over USD 500 billion
About $20 trillion in infrastructure investment required across Asia by 2030
An infrastructure finance deficit is threatening Asia’s growth and prosperity, with an estimated USD 20 trillion needed in infrastructure investment by 2030 to keep pace with economic development and urbanisation.
India will need about USD 4.5 trillion worth of infrastructure investments till 2040, with an estimated investment shortfall of over USD 500 billion, Colliers Research has said.
Currently, the region invests only about half of that amount every year (USD 880 billion). This means that the infrastructure investment gap across Asia will grow to over USD 800 billion per year in years to come.
About, 90 per cent of the current infrastructure projects is financed by governments or government-linked agencies. As national, state and local governments reach their maximum spending and borrowing power, attracting private investments into infrastructure projects emerges as a top priority to address Asia’s infrastructure investment gap.
As a result, investors and financiers, whether private or institutional, are unwilling to finance projects where investment returns are often too low, break-even periods are too long and/or the risk is too high. The solution is to make infrastructure projects more bankable through value creation and revenue generation schemes that are attractive to private sector investors, the report said.
There is a considerable amount of capital available for financing infrastructure projects across Asia and on the other hand, a sizeable number of infrastructure projects looking for capital. However, despite all that capital available for financing projects, many of them still go unfunded as most infrastructure projects are not financially viable on their own. Infrastructure is built first and foremost for their public benefits, so they generate limited revenue to be attractive for investors.
“Infrastructure is one of the biggest enablers of growth in real estate sector resulting in increasing opportunities for stakeholders and enhancing the viability of developments. India enjoys one of the highest infrastructure investment to GDP ratio of 9 per cent in the world which is among the critical enablers of Housing for All mission. Constant improvement and building new infrastructure is critical to the success of affordable housing where demand has been largely unmet,” said Joe Verghese, managing director, Colliers International India.
Real estate strategies, alongside public-private partnerships, infrastructure bonds, user’s fees, advertising and naming rights, can play a significant role in improving the bankability of projects, particularly for transportation infrastructure, by bridging the finance gap, attract private investments and supporting the long-term viability of an infrastructure asset.
“India will need about USD 4.5 trillion worth of infrastructure investments till 2040, with an estimated investment shortfall of over USD 500 billion. With a transparent public-private partnership framework and rigorous diligence, real estate can play a key role in bridging this gap by creating bankable infrastructure projects as well as meeting objectives like Housing for All by 2022,” says Aashish Agarwal, senior director, Valuation & Advisory Services at Colliers International India.
Real estate strategies can play a significant role in making infrastructure projects more bankable across Asia through value creation and revenue generation schemes that are attractive to private sector investors, thereby contributing to bridging Asia’s infrastructure finance gap. In order to be successful, infrastructure real estate strategies must provide win-win conditions for all the stakeholders involved, Colliers Research said.