The review of investments in the first nine months of 2020 reveals that out of $1.2 billion investments, Bengaluru, Chennai and Mumbai together accounted for 71 percent share.

Moneycontrol News

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Despite the pandemic, Indian real estate is expected to close the year 2020 with total investments of $4.8 billion, which would be 8 percent lower than 5.3 billion investments in 2019. The office space market remains to be a sweet spot in the Indian real estate landscape, a new report has said.

Office assets have been favoured globally due to the yield play and decline in interest rates. Office space investment appetite remained intact during the pandemic and was the first to bounce back during the partial relaxation of lockdown.

The strong response to India’s second REIT by global investors indicates a preference for cash flow opportunities in private and public markets, JLL India’s report titled Capital Markets Update Q3 2020 has said.

The review of investments in the first nine months of 2020 reveals that out of $1.2 billion investments, Bengaluru, Chennai and Mumbai together accounted for 71 percent share. Bengaluru led the pack with almost one-third share of real estate investments.

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Though the quarterly trends in 2020 are showing signs of growth, the comparison of average quarterly investments during the first nine months of 2019 and 2020 presents the impact of the unprecedented disruption like COVID-19 on the real estate investment scenario. Average quarterly investments in 2020 at around $400 million are just 27 percent of the 2019 average of around $1,500 million, it said.

The number of deals during the first three quarters of 2020 was lower at 17 as against 41 during the same period in 2019. Though the 2020 investment level is expected to be marginally lower than 2019, recovery would not be broad-based. This is because two large transactions slated to be concluded this year would account for 76 percent of the total investments estimated for 2020.

A look at past upheavals, financial or otherwise, indicates a similar pattern of recovery. Post the global financial crisis (GFC), investments in Indian real estate declined by 71 percent during the first nine months of 2009 over the same period of 2008. However, investors after the brief wait came back with lessons learnt. Investments during the first nine months of 2010 saw a recovery of 92 percent.

Institutional flow of funds includes investments by family offices, foreign corporate group, foreign banks proprietary books, pension funds, private equity, real estate fund-cum-developer and sovereign wealth fund. It does not include REITs investments. Come 2020, a similar pattern has panned out during the first nine months wherein investments declined by 73 percent albeit on a higher base, the report said.

But green shoots of recovery like a strong response to REITs, large office and retail asset portfolio deals in progress, and robust office sector fundamentals indicate that a similar pattern which was witnessed in 2010 could unfold shortly.

Indian real estate has come a long way, post the GFC due to structural transformation as well as regulatory reforms introduced in the last decade. If a similar pattern of recovery takes place, we may expect a broad-based recovery with moderate investments of around $2,300 million in the first nine months of 2021, the report added.

First Published on Nov 3, 2020 03:47 pm

Real estate sector likely to register $4.8 billion institutional fund flow in 2020 despite pandemic

The review of investments in the first nine months of 2020 reveals that out of $1.2 billion investments, Bengaluru, Chennai and Mumbai together accounted for 71 percent share.

tags #commercial #Covid-19 #Real Estate #REIT