JLL expects investors to continue evaluating deal
The Covid-19 pandemic surge during the second half of March 2021 is expected to delay the investment pipeline in the second quarter in the Indian real estate sector, according to JLL’s Capital Markets Update Q1 2021 released on 29 April 2021.
Comparatively, institutional investments continued the momentum during the first quarter (Jan-March) of 2021, registering 21% growth in volumes at US$922 million, indicating sustained investor interest in India’s real estate market.
“The remarkable resilience of the office market and confidence in its long-term growth led investors to chase quality assets available at the core and development stages. We also see the maturing listed REIT market providing an alternative to other asset classes, which lacked income stability,” Dr Samantak Das, Chief Economist and Head of Research & REIS (India), JLL.
Commercial office assets dominated deals with US$864 million transacted, translating into 94% of the total value in the first quarter. Office space developers liquidated their portfolios to deleverage or raise growth capital for the next phase of expansion.
In addition, investors are actively scouting for warehousing assets at present and deals are likely to be concluded in the coming quarters.
The housing sector, meanwhile, continues to experience an infusion of last-mile funding for project completion.
Hyderabad witnessed the highest capital flows of US$384 million, accounting for a 42% share of investments during the first quarter of 2021, due to the launch of new developments by the Phoenix Group.
Mumbai accounted for 21% share of investments with US$193 million deployed in its office and residential segments, supported by the reduction in stamp duty introduced by the State Government of Maharashtra.
The successful debut of three listed REITs further positioned India on the radar of institutional investors. The Brookfield India REIT issue of ~US$521 million was successfully launched in February 2021 and was eight times oversubscribed, with domestic mutual funds being major anchor investors.
The market capitalisation of India’s listed REITs stood at US$6.6 billion as on 16 April 2021, which is around 30% of the total market capitalisation of Nifty Realty Index companies.
Though resurgence in the number of new Covid cases has caught the nation off guard, a swift response to the pandemic and lessons from the past are expected to guide the current actions.
Following broad trends are likely to emerge:
• Investors are likely to continue evaluating deals and concluding investment processes with relaxation in conditions
• JLL believes that the listing of more REITs will gather pace in 2021, also influencing the investment momentum
• Apart from commercial office space, recovery in the housing sector is expected to attract funds, especially for projects in the last stages of completion
• Residential sales in Q1 (January-March) 2021 recovered to more than 90% of the volumes witnessed in Q1 2020 (pre-Covid) across the top 7 cities. Smart recovery in demand in 2021 is expected to improve investment prospects. Opportunities for construction finance and last-mile funding would be available
• Entry of new data centre operators and expansion plans of major players supported by infrastructure and PE funds are expected to drive deals
• Platform deals in the logistics sector are likely to remain active as the segment benefitted from growing e-commerce demand as well as pandemic induced demand for cold storage facilities from pharma sector
Institutional investments have stayed on a firm wicket despite the pandemic in 2020 and are likely to gain further pace in 2021. #investment #property #banking /fiinews.com
