Institutional investments in realty sector doubled to USD 20 billion during 2014-18: Report

Institutional investments in real estate doubled to USD 20 billion during 2014-18 compared to the previous five years, driven by reforms like a law to regulate the sector and relaxation in FDI norms, according to JLL India.

"The period post the global financial crisis from 2009 to 2018, has seen two phases of institutional investments by private equity firms, sovereign wealth funds, insurance funds, pension funds, family offices etc.

"The first phase from 2009 to 2013 was slow in attracting institutional investments, while the second phase from 2014 to 2018 was reforms led and therefore faster," JLL India CEO and Country Head Ramesh Nair said in a report.

The Indian real estate sector attracted USD 30 billion of institutional investments during 2009-2018, and out of which USD 20 billion was invested during 2014-2018, reflecting the positive impact of reforms, the report revealed.

Nair attributed this rise in institutional investments to positive impact of various transformatory reforms undertaken from 2014.

These reforms include Sebi's guidelines for Real Estate Investment Trusts (2014), Housing for All Mission (2015), Real Estate Regulation and Development Act (2016), Benami Transactions (Prohibition) Amended Act (2016) and relaxation in Foreign Direct Investment norms.

Among the different segments of real estate, the report said commercial office space emerged as the most favoured investment avenue for institutional investors as capital flows increased to USD 8.2 billion (2014-2018) from USD 1.6 billion (2009-2013).

Nair said the guidelines of Real Estate Investment Trusts (REITs) have been modified to bring them closer to reality, laying the foundation for global capital flow into office spaces in India.

"Global investors have invested significant capital in acquiring large office assets for building their REIT portfolios in India. In particular, 2017 and 2018 recorded maximum investments of USD 5.9 billion in the office space. This amounts to 72 per cent of the total investments in the commercial office segment during 2014 to 2018," said Samantak Das, Chief Economist and Head of Research & REIS, JLL India.

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He noted that investments in retail and warehousing sectors are also looking promising.

The report further highlighted that during the last decade, private equity held the lion's share of more than 80 per cent in the overall institutional investment.

Additionally, the improved confidence of global investors is clearly evident with an increased share of foreign investments from 31 per cent in 2009 to 70 per cent in 2018. Among the new investment trends going forward, JLL India said affordable housing segment is becoming attractive.

"The emergence of platform deals with increased focus on affordable housing, retail, industrial and warehousing sectors are the key trends to look forward to in the coming years," JLL said.

The consultant also said the risk perception towards the sector is definitely mitigating.