Despite COVID-19, the total expected private equity inflows in the Indian real estate sector is expected to touch $5 billion in 2021, a 4.1 percent increase from 2020, Colliers’ latest report Investments Turbocharged with Focus on Alternate Assets Classes has said.
During H1 2021, the total private equity inflow in real estate was $2.9 billion, more than a two-fold increase from H1 2020, it said.
Investments in under-construction office assets gains momentum
Investors continue to scout for either land or assets in the under-construction stage, as they look to build their portfolio for a future REIT listing. This is due to limited availability of quality rent-yielding assets at attractive valuations, as most of the large developers are already in partnerships with institutional investors, it said.
During H1 2021, about 86 percent of the total investments in the office sector were in land or projects under-construction, it said.
Investors continued to be bullish on the Indian market, snapping up assets in office and industrial space. Office assets accounted for 35 percent of the total investments in H1 2021, followed by industrial and warehousing assets with a share of 27 percent. Investors are viewing the current scenario as an opportunity to snap up properties at attractive valuations.
“The confidence of investors to invest in Indian real estate has strengthened in the past few months. The investment trends reflect an interest in broader classes of assets and structures,” said Piyush Gupta, Managing Director, Capital Markets & Investment Services (India), Colliers.
“Deal types include, forward purchase of office assets, formation of platforms and acquisitions with development risks in office assets, opportunistic acquisitions of retail assets, industrial assets including warehousing and data centers, large credit transactions for portfolio acquisitions, and development financing. These reflect the scale, long-term stability, and sustainability that the Indian market is perceived to provide”, he said.
Opportunistic interest in retail assets remains strong
Investments in retail assets accounted for 29 percent of the total investments in H1 2021. Despite Covid posing a significant disruption to retail businesses and causing a major drop in rental revenues, investor appetite remained intact for exposure to stabilized retail assets as well as for investments in ground-up developments in partnership with selective developers.
Apart from investments in marquee assets in key cities, investors are also considering Tier II and Tier III cities and emerging micro-markets in metros for investments focusing on new developments due to valuation gaps for existing projects.
“Investors are exploring alternate asset classes such as data centers and warehousing, as they look to have a healthy mix of income generating assets in their portfolios, further buoyed by expectations of strong returns, and strong inherent demand for these types of properties,” said Siddhart Goel, Senior Director and Head, Research at Colliers India.
“For the remainder of the year, we also believe that last-mile funding and investments into distressed housing assets will gain traction whilst many investors are also looking at investing in attractively priced assets, which may not be the current flavour but are expected to witness increasing demand post Covid-19 as demand picks up for them,” he said.
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