Representational image. Datacenter company Yotta's NOC room.
Institutional investors deployed $1.357 billion into the Indian commercial real estate market in the April- June quarter of 2021, representing a ninefold increase year-on-year, according to JLL’s Capital Markets Update Q2 2021.
According to JLL, the pace and volume of investments over the past decade have been supported by the introduction of Real Estate Investment Trusts (REITs) in 2014, the Real estate Regulation and Development Act in 2016 (RERA), Benami Transactions (Prohibition) Act and progressive relaxation in foreign direct investment norms over the years.
A mix of defensive and opportunistic investments dominate Q2 2021 deals.
Investments in the warehousing and logistics sectors were attractive due to the increasing shift to online shopping from discretionary to essentials. Major global funds have invested with warehousing developers and operators as scale and regional footprint are the key differentiators in the sector.
Some funds are following opportunistic strategies by investing in marquee retail assets and have been selectively investing in well-established malls.
In future, defensive sectors like warehousing and data centers are likely to gain centre stage, while office assets will gain interest with more visibility on work from office trends. The REITs market is expected to get a further boost as the reduction in lot size of REIT units is expected to drive more retail participation, the report said.
“Despite the second wave of COVID-19 hitting India in April this year, the first six months of 2021 saw investments of $2.7 billion which is 53% of the total investments seen in 2020. Investors are showing resilience and are adapting to the uncertain environment. Relaxing lockdowns during the first three months of 2021 also gave investors a first-hand experience of the post-pandemic world. This led to risk re-rating and asset allocations witnessed a subsequent change in Q2 2021,” said Radha Dhir, CEO and Country Head, India, JLL.
“The first half of 2021 saw broader investor participation and although the economic dent created by the second wave will lead to slower growth in 2021, investments in real estate are expected to maintain momentum. From where we stand, institutional investors have passed the litmus test of resilience during pandemic resurgence and are expected to commit more capital in 2021,” she added.
“The warehousing and logistics sector has been the biggest beneficiary during the pandemic and attracted total investments of over $ 1 billion during Q2 2021. Warehousing accounted for 55% share while retail formed 20% of total investments during the quarter. In addition, the data centre industry has been drawing strong operator and investor interest with various funds exploring entry strategies,” said Samantak Das, chief economist and head of research and REIS, India, JLL.