Europe's Shifting Markets, India's IPO Boom, and Brazil's 2025 Challenges

Here we are with the 10th Edition of The Real Estate Insights. I’m excited to share updates on what is shaping the global real estate landscape each month. And this edition is special. We’ll dive from Europe’s shifting dynamics in the tourist rental market to Brazil’s outlook for 2025, and we’ll also explore Spain's bold measures to address housing shortages, the rise of branded residences in São Paulo, and Southern Europe’s efforts to balance tourism with local livability. And that’s not all! Meanwhile, India takes center stage in the IPO landscape, setting new global benchmarks, and Brazil navigates fiscal and political uncertainties with resilience.

As always, I aim to bring you more than just data; I aim to bring meaningful perspectives that could inspire and inform your next moves. I am Gustavo Favaron, GRI Club’s CEO, and this is my monthly newsletter. Subscribe and share!

Europe’s tourist rental backlash continues

Last week, the inaugural edition of GRI Hospitality Europe took place in Madrid. It gathered decision-makers from the top investors, asset owners, and brands for a series of informal discussion sessions on the sector’s current opportunities and challenges.

I’d like to share some insights: While the overall outlook for the future is positive, particularly in Southern Europe, recent weeks have seen many developments in the backlash against tourist rentals in some of the region's most iconic cities. 

Although Cushman & Wakefield’s analysis reveals Spain as the fourth most promising real estate market for investors, driven mainly by the recovery of tourism following the pandemic, this week, the Spanish government proposed the introduction of a 21% VAT on tourist rentals.

Amid a severe housing crisis marked by rising rents and a shortage of available properties, authorities blame tourist apartments for driving up prices and reducing local market supply. The measure aims to transform short-term rental properties into permanent housing, particularly in "stressed areas" where rent exceeds 30% of household income.

In Madrid, Mayor José Luis Martínez-Almeida has announced a plan to ban tourist rentals within residential communities in the historic city center while converting privately used buildings into affordable housing. Additionally, converting commercial premises into tourist accommodations will be prohibited to protect neighborhood identity and support local businesses.

Spain is far from alone. Italy has seen a rise in residents in Florence and Milan protesting against tourist rentals despite record tourism levels in 2023, contributing 10.5% to Italy's GDP. 

Against the backdrop of the G7 tourism ministers' meeting in Florence, Mayor Sara Funaro has approved a 10-point plan to tackle over-tourism, including bans on key boxes for short-term rentals and loudspeakers for tour guides in its historic center. This mirrors similar initiatives in Pompeii and Venice to preserve local livability and cultural value.

At the same time, housing activists in Lisbon have submitted a petition with over 6,600 signatures demanding a binding referendum to ban tourist lets in residential buildings. 

Rising housing costs have priced out many locals in the Portuguese capital, prompting calls for decisive action. The proposed referendum could phase out 20,000 tourist flats within six months and prevent new short-term rentals in residential areas.

Southern Europe is one of many regions facing these concerns. Croatia’s Tourism Minister, Tonči Glavina, warned that a surge in short-term rentals, adding 26,000 new beds this year, is undermining sustainable tourism and impacting existing accommodations.

Exclusive Report: Country-specific European real estate market analysis

Distinct trends and dynamics have surfaced across Europe’s real estate markets in response to recent macroeconomic shifts and geopolitical pressures. So, where are the major opportunities in both the region and the asset class?

Diving deeper into the individual markets of the UK, France, Germany, Spain, Italy, CEE, and Portugal, GRI Club’s latest report presents high-level analysis from leading market players at Europe GRI 2024 as they identify the major real estate investment opportunities and challenges across the continent.

The UK capital, London, remains on top, considering its flexible transaction environment, strong private equity presence, and promising regeneration projects. However, the market faces concerns over planning inefficiencies and tax policies.

Meanwhile, in France, capital is shifting increasingly towards regional cities driven by limited premium assets in the capital. Foreign investments, led by the US, remain strong, attracted to Paris's unique cultural appeal. 

Conservative banking practices and cautious valuations in Germany keep asset revaluations modest, though resultant discrepancies among valuers create market confusion. 

Heading south, build-to-rent (BTR) in Spain is catching the eye of investors. Consolidated by the high price elasticity in many cities, developers shift from build-to-sell to BTR for quicker returns and fewer risks.

Neighbouring Portugal is seeing confusion among foreign investors following numerous legislative changes, particularly to the Golden Visa and Non-Habitual Resident (NHR) regimes. However, demand from American and Brazilian buyers persists, with particular interest in luxury and short-term rentals.

Meanwhile, Milan has become a prime investment location across the Mediterranean in Italy. It is now comparable to major European cities, attracting interest from Middle Eastern and Asian investors.

CEE also shows signs of recovery with more robust GDP growth and lower unemployment rates than Western Europe. Logistics persists as the region’s darling, but residential sector interest is growing among investors due to urbanization and housing shortages.

India tops global IPO listings with 36%, leaving the US behind

India's Initial Public Offering (IPO) market has experienced an unprecedented surge, setting new benchmarks globally, as EY’s Q3 2024 IPO Trends report highlighted. 

The third quarter of 2024 set a 20-year record with 111 global IPOs, of which India captured a significant 36% share - outpacing the United States at 13% and solidifying its leadership in the global IPO landscape. 

Indian IPOs have achieved impressive returns of 65.3% year-to-date, significantly outpacing the BSE Sensex’s 14.9% gain. In Q3 alone, the country’s main market recorded 27 IPOs, raising USD 4.285 billion - a substantial 115% increase in proceeds compared to the previous quarter.

The real estate sector has been a major contributor to this IPO boom, raising INR 319 billion from 2021 to 2024 across diverse segments, including Housing Finance Companies (HFCs), Real Estate Investment Trusts (REITs), developers, and flexible workspace operators.

According to Colliers, real estate IPOs alone had amassed nearly INR 135 billion by October 2024—almost double the amount raised in 2023—and IPO activity this year has already exceeded the total for 2023.

Recent high-profile offerings have set the stage for this trend, such as Bajaj Housing Finance emerging as the highest-valued housing finance company in India with its blockbuster IPO. The INR 6,560 crore offer saw 63.6 times oversubscription and debuted at a 136% premium. 

Other notable listings include WeWork India’s planned IPO, which targets a USD 2-2.5 billion valuation; EFC Limited’s approval for EMBERSTONE SM REIT, which aims for a public offering of INR 5 billion; and Property Share Investment Trust’s IPO draft filing, which is valued at INR 3.53 billion.

“The positive outlook for IPO activity in India is underpinned by higher investment in infrastructure, favorable demographics, and higher consumer spending supported by a conducive regulatory framework,” commented Badal Yagnik, CEO of Colliers India.

Since 2021, housing finance companies continue to lead IPO volume within real estate at 46%, followed by REITs at 22% and real estate developers at 17%, highlighting robust investor confidence in India’s property and financial sectors.

Outlook for the Brazilian Real Estate Market in 2025

Political uncertainties, fiscal challenges, and macroeconomic factors are the primary concerns for decision-makers in Brazil's real estate market in 2025.

This perspective was shared during closed-door discussions among 450 industry players at the 15th edition of Brazil GRI, held on Wednesday (13th) at the Hotel Unique in São Paulo.

To overcome challenges, the governor of Goiás, Ronaldo Caiado, emphasized the importance of public and legal security as a key driver for attracting real estate investments.

"We achieved R$6 billion in real estate sales in 2023, and in 2024, we expect a 14% growth. Sales should surpass R$6.5 billion," he stated.

From the perspective of foreign capital, Jon Paul Perez, president of the American developer The Related Group, highlights the promising market for branded residences in São Paulo.

Below, we present exclusive insights from leaders on the outlook for the beginning of 2025 across each asset class in the country:

🛍️ Shopping and Retail: After a positive year, rising interest rates may affect 2025 results, impacting retailers and slowing expansion. Mixed-use projects remain popular, while greenfield developments are limited and focus on convenience. Real estate investment funds (REITs) face challenges in raising capital, but the outlook is favorable for companies with access to credit.

💼 Offices: With the 4x1 hybrid model firmly established, tenants prioritize regional infrastructure over evaluating office floors. Peripheral locations are emerging as options for companies seeking lower costs, while REITs in this sector are more affected by investor sentiment than the actual value of the assets.

🏠 Residential: Declining unemployment and strong demand for the "Casa Verde e Amarela" program keep the sector active despite concerns over rising costs and labor shortages. Legislative changes are delaying new launches, favoring inventory sales. High-end demand, including branded residences and studios, remains robust.

🚛 Industrial and Logistics: The sector continues to show strong demand, driven by industrial expansion and new market entrants. Vacancy rates remain low in logistics hubs in São Paulo and regions like the Northeast and Espírito Santo. While new projects face challenges, the market remains resilient with rental adjustments and creative REIT transactions.

🛎️ Hospitality: Average daily rates remain high, fostering optimism about profitability. Conversions and mixed-use projects drive growth. Branded residences and international franchises thrive, while resorts emerge as promising opportunities bolstered by loyalty programs.

🍃 Land Development: Approval timing and rising costs remain key challenges, particularly for affordable projects—launch competition pressures prices, prompting new legal structures to enable low-income developments. Differentiated payment flows, and low G&A costs help sustain the sector.