Institutional investments into real estate triples during 2014-18

MUMBAI: Institutional investors’ appetite for Indian real estate has been growing in the backdrop of series of reforms undertaken by the government and enhanced usage of technology that has changed the investors’ outlook towards the asset class.

Investments into Indian real estate have more than tripled to Rs 140,000 crore between 2014 and 2018 as compared to Rs 46,500 crore between 2009 and 2013, said a CII-JLL report.

Traditional real estate segments such as residential and commercial have been using modern technology across construction, planning and development for over a decade now.

Policy reforms in the sector, the concept of shared economy giving rise to new asset classes such as co-living and co-working spaces and technology driven businesses resulting in the increased interest in data centers have together made times exciting, both for occupiers and investors.

Additionally, introduction of Real Estate Investment Trusts (REITs) have opened new doors for retail investments in commercial real estate.

“India has gradually transformed into an investment destination of international repute post the global financial crisis and real estate and infrastructure have played a vital role. Within the space, adoption of technology coupled with policy reforms is one of the key factors for investors to consider greater participation,” said Ramesh Nair CEO & Country Head, JLL India.

While metros like NCR-Delhi, Mumbai and Bengaluru accounted for 74 per cent of the total institutional investments during 2009-18, he expects tier II and III cities to draw more funds in the coming years. Government’s focus on the growth of smaller cities has been leading the change.

The report also highlighted that the commercial office segment witnessed the maximum share of institutional investments in the past ten years. Rise in the development of environmentally sustainable buildings and subsequent demand from occupiers have added strength to this trend.

From 2009 to 2013, opportunistic funds returned to Indian markets and picked up marquee assets in select offices including commercial and IT parks/special economic zones (SEZs). India’s improving reforms scenario added value to the overall scenario. Notification of REIT regulations in 2014 led to a deluge of investments in high yielding assets with attractive valuations. This was especially in the non-IT office space as most quality IT/ITeS assets were acquired by funds. Investors took note of the innovation introduced at all levels.

With a superior sustainability quotient, Grade-A offices with single ownership and limited supply have pushed global investors to close large deals. But lower availability of quality assets has led to large investors chasing entity level deals leading to extended investment cycles. As a result, the share of investments in the office segment declined during the first six months of the year as compared to the corresponding period the last year.