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PE investment in Indian real estate drops 20% in H1 2023: report

News Mantra — Mon, 03 Jul 2023 04:01:00 +0000

Private equity investment in the Indian real estate sector declined by 20 per cent to $2.6 billion in the first half of 2023, according to Knight Frank India’s report – Trends in Private Equity Investment in India – H1 2023.

Although the decline in the investment climate in India was due to a conservative shift in investment strategies due to increasing investor caution in the face of rising geopolitical tensions and interest rates, total PE investment in the real estate sector reached $5.6 billion in 2023, a growth of 5.3 per cent over the previous year.

Across the sector, the office sector accounted for the largest share of all PE investments at 68 per cent, followed by warehousing at 21 per cent and residential at 11 per cent. This is a 20 per cent decline from H1 2022, as PE investors took a cautious approach in H1 2023, resulting in a conservative shift in investment strategies.

Despite prevailing global concerns impacting investment, growth has slowed only to a limited extent and is expected to rebound in the second half of 2023. Overall, PE investment in India’s real estate sector is estimated to reach $5.6 billion in 2023, representing a year-on-year growth of 5.3%. The decline in investments is the result of a conservative shift in investment strategies.

The report data showed that PE ‘s investments in the Indian office sector reached a staggering USD 1.8 billion in the first half of 2023. Although investments from PE continued to lead in the first half of 2023, accounting for a 68% share of total investments, this dominance was supported by the resilience of investable office real estate. PE investment in the office sector registered a 24 per cent year-on-year increase during the period, driven primarily by a large deal worth $1.4 billion between GIC and Brookfield India Real Estate Trust REIT. About 80 per cent of the investment was in completed properties, while 20 per cent was in new and under-construction projects. Mumbai, NCR and Bengaluru emerged as leading office investment destinations in the first half of 2023.

According to the report, the residential sector attracted PE investments $277 million in investments during the same period. The investments were largely residential projects that were still under construction and targeted early-stage investments for better returns. A total of 82 per cent of PE was invested in the housing sector by foreign PE. NCR and Bengaluru emerged as the leading investment destinations, driven by development stage transactions involving prominent global players. Though India’s retail sector did not see PE investment during this H1 2023 period, listing of a retail company REIT would lead to increased investor interest, with tier metros II having more appeal.

Though India’s retail sector did not see PE investment during this H1 2023 period, listing of a retail company REIT would lead to increased investor interest, with tier II metros having more appeal. Investor interest in the retail sector has expanded beyond major metropolitan cities in the last decade. Markets like Chandigarh attracted investments of $267 million, Nagpur and Amritsar $100 million each, Indore $61 million and Bhubaneshwar $46 million.

However, the warehouses segment witnessed a decline in the first half of 2023 with an amount of $555 million compared to $1.2 billion in the first half of 2022. According to the report, lack of supply of quality facilities contributed to the slowdown in investments in the sector. Across India, Mumbai saw the highest investment at 48%, with NCR second at 32% and Bengaluru at 13%. Nearly 75% of investments came from Asian countries in H1 2023, compared to 86% of investments from Canada and the US in H1 2022.

Shishir Baijal, Chairman & Managing Director, Knight Frank, said, “India’s economic growth in the last few quarters has been a strong reason for long-term confidence among global investors. However, we have seen a decline in investment volumes over the past year due to global economic challenges that have led some major economies to take drastic fiscal and monetary measures. This has prompted investors to re-evaluate their strategies, at least in the short term. The Indian office sector continues to attract investors, especially when it comes to high-yielding assets. Unlike other global gateway markets, India has seen steady growth momentum, which has boosted investor confidence in the sector. Looking ahead, the office sector is likely to remain a favorited among investors, as it is expected to maintain its momentum in the short to medium term.”

The office segment has been PE investors’ preferred choice for investment in the first half of 2023, mainly due to the resilience of high-quality office properties. The report forecasts factors such as government investment, currency fluctuations, inflation, interest rates and office supply to drive 5.3% annual growth in PE investment in India in 2023 to $5.6 billion. The outlook for PE investment in Indian office real estate remains positive. As global headwinds ease, the resilience of the Indian economy and the favorable economics of real estate investments will have a positive impact on PE investment activity in the sector, the report said.

-SURESH RATHOD

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India now a preferred market for global investors for office space

News Mantra — Mon, 19 Jun 2023 09:35:35 +0000

Growth opportunities in tier-1 and tier-2 cities are driving investment in office space in India. The latest Colliers Global Insights & Outlook – Office Report shows that the office sector in India continues to dominate institutional investment inflows, accounting for over 44% of total investments over the last five years (2018-22).
The Indian office sector has already recorded institutional inflows of USD 0.9 billion in the first quarter of 2023, accounting for 55% of total investments. India’s office space saw steady investment of $3.2 billion since 2018, $2.8 billion in 2019 and $2.2 billion in 2020 the year of covid, reaching a low of $1.3 billion in the covid recovery year of 2021, with investment in office space rebounding to $2.0 billion as companies recovered from the covid-19 crisis.
From 2018 to 2022, the share of total investment averaged 43.8%, with the lowest being 32% in 2021 and 55% in 2018 of total investment in Indian office space by institutional investors.
“Amidst global recalibrations of office space driven by cost control, hybrid work culture, and business slowdown, markets like India continue to benefit due to lower costs with quality of assets, talent pool availability, and increased institutionalized framework. Although global sentiments have reduced the Investor activity in India, institutional buyers remain bullish over the medium to long term as the underlying demand for Office space remains strong and markets like India benefit from the shift in office market dynamics,” says Piyush Gupta, Managing Director, Capital Markets & Investment Services.
In India, office demand has recovered at a faster pace despite ongoing global headwinds in the form of economic disruptions and geopolitical tensions. According to the report, 50.3 million square feet of office space was leased in the 6 largest cities in 2022, more than any other year. The report stated that Q1 2023 started cautiously with total leasing of 10.1m sq ft in the top 6 cities, 19% lower than the same period last year. The sectors that led to an increase in lettings were technology with a 22% share, closely followed by flex space at 20%. Flex space has proven to be a compelling alternative to traditional office space for occupiers as it supports occupiers’ evolving hybrid strategies, the report said.
“As Hybrid working remains the mainstay for occupiers in India, relevance of physical office space remains intact. Occupiers are focusing on optimal locations, high-quality amenities, and well-designed fit-outs as they look to create an enriching experience for their employees,’’ said says Vimal Nadar, Senior Director and Head of Research, Colliers India.
When it comes to office space, the focus is largely on ESG-compliant buildings that have higher operational efficiencies and reduce energy consumption to meet their net-zero targets. On the other hand, developers who take into account the evolving needs of users are integrating smart technologies and sustainable infrastructures into their workplace projects. In the future, Indian office spaces will be equipped with smart technologies such as the Internet of Things (IoT) and predictive analytics for cost optimizations, carbon reduction and better space utilization. With ESG being critical for occupiers, green finance will become an integral part of investors’ strategy. India’s economic resilience, supportive government policies and improving business environment will enable it to maintain its position as an attractive market for global investors in the long run.

-SURESH RATHOD

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Rakesh Jhunjhunwala was asked, ‘How does it feel to be rich in a poor country?’ This is what he said…

Newsmantra — Tue, 16 Aug 2022 12:24:32 +0000

Rakesh Jhunjhunwala often spoke at length about wealth creation. Many enthusiasts, learners and experts wanted to learn more about stock market investing from Big Bull. So, they asked him many questions. However, there were times when he faced slightly-unusual questions.

Jhunjhunwala was once asked how it felt to be rich in a poor country. In his opinion, India is not a poor nation as India has a thriving film industry in addition to a rich culture, cuisine, resources, and fine way of thinking. Therefore, he had no guilt at all.

“Equality of mankind is a myth, equality of opportunity is a possibility,” RJ quoted Winston Churchill while speaking further on the topic 10 years back at EVOKE 2012. He said, as a rich man, he would like to ensure that all Indians had equal opportunities.

If India had not been a wealthy nation, he believed he would not have been as wealthy. The index was 112 points when he began his career in the stock market in 1985. The index stood at 20,000 at the time of his address in 2012. He believed it to be an illustration of the development and prosperity of the nation. He claimed he would never have achieved his level of wealth if there was no prosperity in India

He was also grateful and fortunate to be working in the post-liberalisation era. In his opinion, India was about to embark on its second phase of liberalisation. People could make money thanks to liberalisation. He was delighted to note the current influx of young billionaires in India.

He firmly believed that spurring prosperity was the only way India could end poverty. However, one shouldn’t worry about how the cake was divided at the same moment. Instead of worrying about the size of the cake, Jhunjhunwala advised. He continued that the cake divides more effectively as it grows larger.

“Will I ever stop if I had ten times as much money as I do now? The reply is no, I won’t! I’ll just say that I’m still a middle-class guy. I treat every rupee as valuable,” said India’s Warren Buffett.

On August 14, Rakesh Jhunjhunwala passed away from a sudden heart attack. He was 62.

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Special Liquidity Scheme for NBFC

Newsmantra — Thu, 02 Jul 2020 07:33:34 +0000

With a view to improving the liquidity position of NBFCs as well as HFCs, the Union Minister for Finance & Corporate Affairs Smt Nirmala Sitharaman had announced on 13th March 2020, launch of a Special Liquidity Scheme of Rs. 30,000 crore. RBI will provide funds for the Scheme by subscribing to government guaranteed special securities issued by the Trust. The total amount of such securities issued outstanding shall not exceed Rs. 30,000 crores at any point of time. Government of India will provide an unconditional and irrevocable guarantee to the special securities issued by the Trust. The Scheme is being launched on July 1, 2020through a Special Purpose Vehiclein the form of SLS Trust set up by SBI Capital Markets Limited (SBICAP).

Any NBFC including Microfinance Institutions registered with RBI under the Reserve Bank of India Act, 1934 (excluding those registered as Core Investment Companies) and any HFC registered with the National Housing Bank (NHB) under the National Housing Bank Act, 1987which is complying with the following broad conditions will be eligible to raise funding from the said facility:

a. Compliance with RBI regulations on Capital adequacy
b. Net NPA is less than 6% as on 31.03.2019
c. Net profit in at least one of the two preceding financial years
d. Rated as investment grade by a rating agency
e. Is not reported under SMA-1 or SMA-2 category by any bank for their borrowing during the period one year prior to 01.08.2018

The Scheme will remain open for 3 months for making subscriptions by the Trust.The period of lending (CPs/NCDs of NBFCs/HFCs for short duration of upto 90 days) by the Trust shall be for a period of upto 90 days. The financing would be used by the NFBCs/HFCs only to repay existing liabilities and not to expand assets. Further, those market participants who are looking to exit their standard investments with a residual maturity of 90 days may also approach the SLS Trust.

This facility is a part of the Government of India and RBI’s efforts to alleviate the concerns of the market participants on the availability of fundsto the sector. Those wishing to avail liquidity under the Scheme can apply at info@slstrust.in. Details of the Scheme can be viewed on the website of SBI Capital Markets.

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