Indian real estate to fortify institutional investors’ confidence in 2022

These investments are likely to be driven by broad-based growth on the back of a low-interest environment, continued monetary stimulus, improving revenue visibility across asset classes, and inclusive growth policy

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Institutional investors including global funds, private equity firms and domestic entities are expected to continue investing in Indian real estate with more funds flowing into the sector in 2022.

These investments are likely to be driven by broad-based growth on the back of a low-interest environment, continued monetary stimulus, improving revenue visibility across asset classes, and inclusive growth policy.

Fund managers are seeing newer financing avenues opening up in the backdrop of revived business confidence led by recovery of demand across segments

“We have invested around Rs 3,000 crore in real estate till now since March this year and we continue to see that strong momentum in 2022 as well. Most of the external capital in 2020 and 2021 went into portfolio deals and repair capital, but now see funds flowing into land deals along with refinancing,” said Vikas Chimakurthy, CEO, Kotak Realty Fund, part of Kotak Investment Advisors Limited (KIAL).

The largest domestic alternate asset fund of India, KIAL itself has raised $380 million or Rs 2,770 crores from global financial investors including Allianz Group through its latest real estate fund earlier this year. This fund is one of the largest dedicated real estate financing funds closed in recent times in India, particularly during the Covid-19 pandemic.

Led by large portfolio deals, institutional investments had managed to cross the $5 billion mark in 2020 and stood at $4 billion in 2021.

“Improved resilience to uncertainty, economic resurgence, and committed dry powder is expected to drive 2022 investments at par with the momentum witnessed during 2017-2020 where we saw investments in the range of $5 billion,” said Lata Pillai, Managing Director and Head, Capital Markets, JLL India

According to her, the build-up of asset portfolios for a listing of new REITs, increased competition for quality assets, geographical and asset diversification, a strong interest for logistics, data centers assets in the ‘new normal’ will be the multiple investment drivers during 2022.

Residential real estate will also be a key beneficiary of these investments as experts believe the segment is likely to touch pre-pandemic quarterly sales volumes in 2022 and given the strong momentum may also match the pre-demonetization quarterly sales in the latter half of 2022.

“As we emerged out of the first COVID-led lockdown in Q2 last year, we saw housing sales pick up due to a mix of factors like increasing affordability, multi-decade low mortgage rates and the increased emotional value placed on home ownership during the pandemic,” said Sharad Mittal, CEO of Motilal Oswal Real Estate (MORE)

Mittal expects the fundamental factors combined with government initiatives will drive housing demand even higher in the near future. Going forward, the liquidity scenario will improve, and the real estate sector will receive much-needed funding

The real estate private equity arm of Motilal Oswal Group has already invested over Rs 1,200 crore in projects across Mumbai, Bengaluru, Chennai, Hyderabad, and Ahmedabad through its investment platform post the outbreak of the Covid-19 pandemic and is in the process to invest additional Rs 1,000 crore by March end

Housing has witnessed green shoots of recovery and is expected to gain further momentum hereon owing to renewed buyer confidence, record low interest rates, offers by the developers that have been instrumental in supporting the residential market recovery.

Institutional investors’ appetite for Indian real estate continues to be unabated despite the resurgence-led uncertainty and disruptions caused by the Covid19 pandemic. The long-term potential for growth and attractive returns ensured that investors continue to infuse the much-needed capital in the sector.

Across India, investors are expected to take a cue from improvement in operational metrics of various asset classes such as office space leasing and residential sales. The cautious unlocking of the economy, increased pace of vaccination and affordability synergy is expected to push these investments further