Institutional investment in India’s real estate sector closed at $4.3 billion in 2021, down 14% from the previous pandemic year, even as this year saw 57 deals compared to 27 deals in 2020, according to a report by global real estate services firm JLL, reviewed by Capital.com.
This compares to the two $3.2 billion portfolio transactions announced in the last quarter of 2020, which contributed to a strong rally, according to the report titled Capital Markets Update Q4 2021.
Investments were more diversified, with the first three quarters showing an improvement over the same quarter of the previous year and were spread across various sectors and much more diversified compared to the previous year, the report noted.
The outbreak of the third wave led to global restrictions, which indirectly affected the investment dynamics in the last quarter of the year.
Serious impact of Covid
“One of the main reasons for the decline in investment volume was the intermittent interruption of the investment process due to the severe impact of the second wave of Covid during the first half of 2021,” said Lata Pillai. , Managing Director and Head of Capital Markets. -India at JLL
“Although the investment climate showed signs of recovery during the third quarter of the year, the appearance of a new variant and the uncertainty about its impact disrupted the conclusion of agreements in the fourth quarter. of 2021,” she added.
“However, looking beyond the numbers, it’s important to note that there is a clear sign of broad-based recovery with positive investor sentiment across all asset classes. I think our industry is poised for a 2022. much stronger given the current investment momentum and deal flow we are seeing on the ground,” she added.
Cities like Hyderabad and Mumbai, NCR take the lead
The Indian cities of Hyderabad, Mumbai and the National Capital Region (NCR) accounted for a 45% share of investment. Hyderabad and Mumbai each accounted for a 16% share of total investment in 2021, while NCR-Delhi at 13% took third place.
Investments were also quite diversified across cities. On the other hand, consolidation in real estate has led to a parallel trend of increased investment at the entity level, with mergers and acquisitions gaining traction.
Hyderabad led the investment scenario with foundation and development deals by leading global funds. The city was preferred with well-known office space developers attracting quality tenants at the pre-commitment stage.
Office supply in 2022 has already seen 25% pre-letting in some projects and boosted investment momentum. Mumbai has witnessed an increased interest in the residential segment owing to the strong recovery in residential house sales over the year.
Residential is making a comeback
A distinguishing feature of investments in 2021 was the return of the residential sector, which saw the second highest share of 25%. The residential sector attracted 2.3x investment at $1 billion versus $460 million in 2020.
The renewed interest in the sector is mainly due to the strong recovery seen with robust sales growth of 47% in the first nine months of 2021 compared to the same period of 2020.
Investments in the office sector accounted for the largest share of 31% in 2021, while they were highly skewed in 2020 due to two large portfolio transactions amounting to $3.2 billion. Net office space uptake increased slightly by 2% year-on-year to 26.2 million square feet across India’s 7 major cities from a year earlier.
Warehousing, logistics and data centers continued to see increased interest from investors, with logistics accounting for 20% of total deal volume, while data center investments started to pick up with some joint ventures announced in the segment.
The outlook for the sector looks good
Continued political support in the form of accommodative policy, the expected surge in infrastructure spending and the dry powder committed by institutional investors are expected to boost investment in 2022 to match the momentum seen in the 2017 period. -2020.
The building of asset portfolios for the listing of new REITs, increased competition for quality assets, geographic and asset diversification and strong interest in logistics and data centers in the “new normal” would be the main drivers of investment in 2022, the report notes.
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