Kerala's Start-up Ecosystem the Next Growth Engine after Tourism

With a conducive environment for entrepreneurs to grow and flourish, the start-up ecosystem in Kerala is catching up with neighbouring Karnataka.

Primarily known for tourism, the state currently hosts more than 2,200 start-ups, with over 36% of these in Kochi alone. The CREDAI-ANAROCK report 'Kerala - Unravelling the Growth Trajectory' unveiled at the CREDAI Kerala Statecon - 2020 held in Kochi today, confirms that the state now ranks among India's top 5 start-up incubation hubs along with Gujarat, Karnataka, Odisha and Rajasthan.

The report finds that in terms of overall start-up funding in Kerala, both 2018 and 2019 saw significant growth over the previous years.

Anuj Puri, Chairman - ANAROCK Property Consultants says, "In just the first nine months of 2019, the state received approx. USD 44 mn in funding spread across 13 deals - a notable increase of 18% over 2018. Among the top investors were Unicorn India Ventures, India Angel Network Fund, Malabar Angels, Sea Fund, Jose Pattara and Flat6Labs Bahrain."

Relatively low cost of operations, skilled manpower availability, modern technology use and highly supportive government policies such as Kerala Start-up Mission (KSUM) have been key factors driving Kerala's start-up revolution.

Mr. Krishna Kumar - Chairman, CREDAI Kerala says, "Kerala is one of the most literate and skilled states in India. Schools, colleges, start-up incubators and government institutes have been very efficiently linked into an ecosystem that provides ample opportunities for the growth of entrepreneurship and innovation."

Other notable features of Kerala's start-up ecosystem:

• In early 2019, the government initiated an integrated start-up complex in Kochi spread over 1.8 lakh sq. ft. Three similar projects are in the pipeline, increasing the capacity to over 5 lakh sq. ft.
• Nearly 59% of Kerala's start-ups have their headquarters in Ernakulam and Thiruvananthapuram districts.
• Home to IIM and National Institute of Technology, Kozhikode has emerged as a preferred start-up destination in recent years. The city hosted nearly 10% of the state's start-ups in 2019, compared to 6% a year earlier.

Kerala Real Estate Sector's Untapped Potential

The report further highlights the untapped potential within Kerala's real estate sector. Kochi is the epicentre for most real estate developments, accounting for nearly 45% of the overall market activity. Thiruvananthapuram and Thrissur are the next two big real estate destinations in the state.

To the backdrop of Kerala's burgeoning IT sector and rapidly improving physical infrastructure, its real estate sector will potentially attract major NRI investments in the future. Interestingly, nearly 16.5 million sq. ft. of IT parks are already operational in Kerala's key cities, collectively host over 800 companies - and another 10 million sq. ft. are being developed in the state. The massive NRI investments into Kerala, which contribute significantly to its economy, can be optimally utilized for further real estate developments. Special schemes for NRIs and marketing campaigns in other countries can also help raise NRI investments in the sector.

Its environmental and climatic conditions make Kerala a very favourable destination for senior living, thus providing an opportunity for the development of this exciting alternate asset class. Similarly, the high saturation of educational institutions and Study in India program provide massive opportunities for student housing in Kerala.

Other report highlights:

• Well-established tourism real estate is attracting multiple branded hotel chains into the state. Kerala is one of the major contributors to tourism in India. The total revenue from foreign and Indian tourists (estimated at INR 33,400 Crore nationally) accounts for nearly 7% of the state's GSDP.
• The education sector continued to attract the highest budgetary allocation of INR 20,862 Crore in FY20-21.
• RERA's recent implementation in the state prepares the ground for increased transparency in Kerala's real estate sector. That said, RERA deployment needs to increase and achieve wider market coverage in the state.
• NRI remittances are the backbone of Kerala's economy. While India retained its top position worldwide in inward remittances (of approx. USD 82 bn, or 2.8% of India's 2019 GDP), Kerala accounted for nearly 19% of the total - the highest in the country.
• The Life Sciences Park at Thiruvananthapuram will boost one of Kerala's USPs – healthcare – with an integrated approach to life science research for agriculture, food and nutrition, human health, biotechnology and medical technology.

Download the report - https://www.anarock.com/research-insights/kerala-unravelling-the-growth-trajectory