About 700 acres of land worth more than $1.1 billion has been acquired between January and June 2022 across eight cities to develop housing, office, retail, logistics and data centre projects, Anshuman Magazine, Chairman and CEO, India, South-East Asia, Middle East & Africa, CBRE said on September 14. He added that Real Estate Investment Trusts (REITs) are expected to get listed on the stock exchanges to monetise not only rent-yielding office but also retail and warehousing assets.
“In H1 2022, of the total $1.1 billion invested in land acquisition in the country, nearly half went into the residential sector. Therefore, we expect the sector to continue to hold a sizeable share of the capital inflows this year,” he said.
REITS would get listed on the stock exchanges to monetise rent-yielding office, retail and warehousing assets going forward, Magazine said, adding this is expected either this year-end or early next year.
“Work is happening on that front,” he said.
He also said that in the light of rising interest rates, high commodity process and possible recession in the US and European economies, there was a need to maintain a cautious stance.
Magazine further said investments in real estate could grow by 10 percent this year to reach near the 2019 peak of over $6 billion.
Investment activity in land / development sites is expected to hold strong, with the residential sector accounting for a major portion of these capital inflows. In H1 2022 alone, nearly 700 acres of land across various asset classes were acquired for over $1.1 billion. This has been primarily for development purposes, he said.
Land prices have also increased from 6 to 8 percent in residential and commercial segments depending on which pocket, he said.
"The strong momentum in land acquisition will continue. We have witnessed growing interest from both developers and investors alike in the real estate sector. Of the nearly $ 5 billion deployed to acquire nearly 4,000 acres of land / development sites between 2020 and H1 2022, the residential sector accounted for almost 36 percent, the highest among all real estate sectors," he said.
While institutional players have been acquiring land for commercial and data centres development, developers have primarily been purchasing land parcels for residential developments, owing to the strong upcycle that the sector is currently witnessing.
Investments in the real estate sector to continue
Enthused by the robust recovery of the real estate sector in India, investments in the real estate space grew by 4 percent Y-o-Y in H1 2022 to $3.4 billion. The office sector dominated investment activity during the period with a share of 48 percent followed by development sites / land at 33 percent.
Interest in the retail sector is expected to grow. Investments in the retail sector accounted for 13 percent of the total inflows in H1 2022 compared with one percent in 2021. This investment trend is expected to continue, with the investment activity expected to rise by nearly 10 percent from 2021 levels to reach near the 2019 peak of over $6 billion, said the report released by industry body CII and property consultant CBRE India titled 'Indian Realty Outlook - Demystifying Future Growth Opportunities'.
The retail sector to emerge as a strong focus point in the times to come. This is owing to the improving consumer sentiments that have led to a strong bounce back in terms of consumer mobility and retailer leasing in H1 2022. The trend is expected to continue as India has a large consumer base but remains underpenetrated from an organized retail standpoint.
Greater activity from domestic as well as institutional players in both brownfield as well as greenfield categories in this sector is anticipated. Quality retail assets will not remain concentrated across tier I cities as credible developers are already announcing plans to foray into tier II locations such as Lucknow, Ahmedabad, Indore, and Goa among others.
REITs could emerge as a stronger investment medium owing to portfolio expansion and the launch of new REITs across office, industrial, logistics, and retail assets. Some of the factors that are aiding this trend are an enabling ecosystem created by the central government, increased participation in the equity markets, and growing financialisation of assets.
“We also expect investments in alternate assets, particularly data centres (DC), to gain further traction amidst rising digitalisation and a strong policy push towards a digital economy. We anticipate two large players with national presence to file Draft Red Herring Prospectus (DRHP) for REIT IPO with SEBI within this fiscal year,” Magazine said.
The CII-CBRE report noted that the office space absorption would be upwards of 53-57 million square feet by the end of 2022. In H1 2022, 29.5 million square feet of leasing activity was recorded, up 157 per cent year-on-year.
“Developers are putting money into commercial segment and India would continue to retain the top spot for offshoring.”
The residential sector is likely to witness both sales and new launches to reach a decadal peak in 2022 and cross the 200,000-mark. The industrial and logistics sector is likely to clock a growth of about 12 percent on an annual basis, with leasing activity remaining range-bound at 28-32 million square feet in 2022.
The industrial and logistics sector expects an overall leasing activity in 2022 to remain range-bound at about 28-32 million sq. ft., a growth of up to 12 percent on an annual basis. This may be a result of the continued expansion of 3PL and FMCG and other manufacturing players taking up space, ones that are the backdrop of every macroeconomic recovery.
Given that supply chain firms have started to mellow in the recent past, supply addition is expected to improve H2 2022 and about 25-28 million sq. ft. of new warehouses to become operational during the entire year – a growth of up to 12 percent on an annual basis.
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