Vishal Goel Managing Director Rx Propellant
India’s IT sector growth has been phenomenal and contributes significantly to the total exports the country does. Although the push to IT (information technology) and BT (biotechnology) started at the onset of the 21st century, BT/Lifesciences/Pharma sector has been a sunrise sector which is waiting to bloom and contribute significantly to the Indian exchequer.
The private players have been extremely robust in creating infrastructure so that the IT Industry could focus on the core areas and not pump money in Capital expenditure, thus creating clusters on Information economy and alternate to silicon valley. A lot of institutional investors – be it Sovereign funds, pension funds, large private equity funds – have been actively participating in infra creation in IT space
The Indian economy got strong tailwinds post-covid, with the west and the world looking at alternatives to China, or the China Plus strategy for production across sectors. The capabilities India has shown, as being the vaccine factory of the world, during Covid, made the world look at India as hedge against China. When the world was on the brink of a collapse due to the COVID-19 pandemic in 2020, India supplied life saving vaccines to over 150 nations across the globe, highlighting its potential in the life sciences sector to cater to global needs. Today, India is the third largest life sciences hub in the world with a fast-increasing population, rising life expectancy, a strong industrial base, and inclusive government initiatives. Here, the presence of state-of-the-art infrastructure plays a key role in helping drive the growth of this sector. A number of factors will accelerate this growth. At a global level, the realignment of worldwide supply chains — of which India is a major beneficiary — and an ongoing patent cliff that will unlock a global market worth up to $250 billion will support the industry.
With performance linked incentives, India’s BT/life sciences sector is expected to contribute significantly to the economy. Indian economy has been primarily driven by private and PPP (public private partnerships) as far as infrastructure creation is concerned. The infrastructure creation will continue to be driven by private players. In an otherwise challenging global environment, India has been an outlier and is expected to overtake Germany and Japan to become the third largest economy in the world.
Historically, most global institutional capital in India was directed towards traditional property types like offices, residential, retail, and hospitality, but as these markets mature, risk-return dynamics have shifted. Investors now seek alternative property types for more attractive returns. This shift has boosted activities in areas like data centers and industrial and warehousing real estate. Notably, the life sciences real estate sector presents a unique opportunity with attractive and resilient risk-adjusted returns due to high demand and a shortage of quality supply. This resembles the early days of the Indian office sector, which later saw significant value creation for early investors. In summary, India’s appeal to global institutional capital is on the rise, diversifying investments beyond traditional real estate into promising alternative sectors, particularly life sciences real estate.
India’s talent pool is available at one-third the cost in the US, in Research and Development, giving huge and growing potential for outsourcing. Because of this, the life sciences sector is expected to grow significantly in the coming decade.
The creators of infrastructure, or the mainstream property developers, have not traditionally offered real estate solutions tailored to the needs of life sciences corporations. Consequently, many such companies have been compelled to construct their own facilities. This diversion of capital over an extended period has steered them away from their core competencies, leading to involvement in real estate development and management, areas where their expertise is often lacking. Consequently, life sciences corporations frequently find themselves operating from properties that lack proper zoning or infrastructure, which are essential for supporting their research and manufacturing activities.
For substantial investors with abundant resources and the capacity to provide real estate solutions specifically designed for life sciences tenants, there exists a significant opportunity to capitalize on the sector’s growth. However, to harness these opportunities effectively, they must adhere to three crucial principles.
Technical Expertise: Firstly, a deep understanding of the industry is essential because the needs of tenants can be diverse and highly complex. It is critical to comprehend the client’s business thoroughly. Investors must ensure that their partners possess in-country scientific knowledge and a clear understanding of the specific technical requirements for the laboratory or specialized manufacturing facility they intend to acquire.
Adaptation and Sympathy to the Environment: Secondly, foreign investors must be willing to adapt to and be mindful of the existing ecosystem. Shifting the industry’s mindset from self-construction to a more commonplace leasing approach requires a comprehensive understanding of the market and its dynamics. This entails grasping the perspectives of clients and collaborating with them to illustrate the advantages of a new way of conducting business, particularly the faster time-to-market that leasing arrangements can offer.
Operational Proficiency: Thirdly, operational expertise is crucial. Life sciences facilities are often critical to businesses and subject to rigorous regulatory oversight. As a result, they must operate at the highest professional standards. Investors must demonstrate to their clients that they possess the necessary operational knowledge and a proven track record to ensure uninterrupted operations.
The opportunity for foreign investors in the life sciences sector arises from the disparity between demand and supply, coupled with the absence of established developers catering to this industry. This situation allows overseas investors to play a crucial role in creating the facilities necessary to meet the burgeoning demands of the life sciences sector in India.
As India’s presence on the global stage continues to expand, it is poised to capture even greater attention from international investors. The country’s vast market, abundant pool of talent, and cost-efficiency will sustain its appeal to those looking to maximize their capital investments. To achieve success in this endeavor, it is imperative to collaborate with the right partner. This partner should possess a comprehensive understanding of the market and a profound knowledge of its unique attributes, as well as recognize the potential positive outcomes it offers.
For investors seeking risk-adjusted returns that surpass those available in conventional real estate ventures, the Indian life sciences sector remains an alluring and compelling opportunity.
Corporate Comm India (CCI Newswire)
