Real estate update: Institutional investments fall 27% in April-June period

Institutional investments in Indian real estate fell 27 per cent during the April-June period to USD 966 million amid global economic and geopolitical headwinds, according to JLL India.

The institutional investment in real estate stood at USD 1,329 million in the year-ago period.

As per the data, the institutional investments in the office segment of real estate rose to USD 652 million in April-June 2022 from USD 231 million in the corresponding period of the previous year.

The inflow at entity levels and alternative assets (data centre) stood at USD 110 million and USD 64 million, respectively, in the second quarter of 2022 from nil in the year-ago period.

However, the institutional investments in the housing segment declined to USD 60 million in April-June from USD 78 million a year ago, while the inflow in retail real estate fell to USD 51 million from USD 278 million.

The institutional investment in the warehousing segment declined sharply to USD 29 million in April-June 2022 from USD 742 million in the corresponding period of the previous year.

"The rebound in the office sector with a return-to-office and renewed leasing led to improved investment sentiments as reflected in USD 652 million capital flow during Q2 2022. There was a preference for core assets, indicating an inclination for operational rent-yielding assets," said Lata Pillai, Head of Capital Market, India, JLL.

Data centres and warehousing remain sectors to watch out for, she said, adding that "we are expecting to see multiple land/portfolio acquisitions and strategic partnerships in the coming quarters".

In the first half of this year as well, the institutional investments fell 27 per cent to USD 1,909 million from 2,630 million a year ago.

"The expected growth in investments in 2022 was impacted due to global headwinds caused by the geopolitical situation," JLL India said.

The institutional flow of funds includes investments by family offices, foreign corporate groups, foreign banks, proprietary books, pension funds, private equity, real estate fund-cum-developers, foreign-funded NBFCs and sovereign wealth funds.

It also includes anchor investors in Real estate investment trusts (REITs). The data has been compiled as per available information in the public domain.

The investment period has been captured on the basis of the term sheet signed or transaction announcement and not from the actual transfer of capital.

In its report, JLL India highlighted that the credit flows from the banking sector witnessed sharp growth during the last three and half years.

The real estate sector lending by banks during the first five months of 2022 equals 75 per cent of 2021 levels.

In the January-May period of 2022, the net credit disbursal stood at USD 4 billion.

"The near standstill in the real estate segment during the pandemic was reflected in the sharp decline in net credit disbursal from USD 4 billion in 2019 to USD 1.5 billion in 2020. Construction finance dried up sharply as the project construction was stalled due to the pandemic conditions.

"However, the situation reversed in 2021 with a gradual return to normalcy," said Samantak Das, chief economist and head of research and REIS, India, JLL.