Institutional investment posted 17% Year-on-Year (YoY) development through Q3 2021 (July-September) as investors continued to conduct bargains in spite of the resurgence-led uncertainty and disruptions, according to JLL’s ‘Capital Markets Update Q3 2021’ released today.
However, as compared to Q2 2021, volumes registered through the quarter are decrease by 47% on a sequential basis. The recovery in investments through the very first nine months of 2021 has been superior than the pandemic year as total bargains of $2,977 million had been recorded as against $1,534 million through the prior period.
The muted development in transactions is most likely due to delays in the deal method influenced by travel restrictions. However, some funds with lengthy-term horizons have upped their danger appetite by investing in opportunistic asset portfolios. Listed REITs continued to raise low-price debt and use the proceeds to obtain assets at appealing valuations.
Across India, investors are anticipated to take a cue from improvement in operational metrics of many asset classes as industrial workplace space witnessed 8% YoY development in net absorption at 5.85 million sq. ft in Q3 2021, whilst residential sales grew by 65% on a sequential quarter basis registering sales of more than 32,000 units.
17% YoY development in investments through Q3 2021
“Close analysts of investments during Q3 2021 reveals that it has been more balanced with the residential sector accounting for 29% of the total investments, followed by alternative sector – Data Centre (DC) accounting for 22% share. The mixed-use project of residential and commercial accounted for 19% of the total investments. Investments during the quarter have been broad-based as compared to investments in only two sectors during Q3 2020,” stated Lata Pillai, MD and Head, Capital Markets, India, JLL.
“The Reserve Bank of India has kept the policy rates unchanged despite inflation concerns as sustained nurturing of economic growth remains a priority. It has maintained its GDP growth forecast at 9.5% for the financial year 2021-22, expecting strong economic growth in coming quarters,” she added.
The residential sector has seen a robust sales development of 47% through the very first nine months of 2021 more than the similar period of 2020. The third quarter proved that pandemic resurgence had a restricted effect as sales grew by 65% on a sequential basis.
“The cautious unlocking of the economy, increased pace of vaccination and affordability synergy led to continuous growth in sales of residential units. Investment flows in the residential segment were impacted due to increased risk perception, shadow banking crisis and structural changes in the sector. The third quarter witnessed increased debt funding for projects that have received good home buyer responses due to the developer track record. Investors are likely to infuse more capital in the residential segment towards projects in the last stages of completion,” stated Dr Samantak Das, Chief Economist and Head of Research & REIS (India), JLL.
In option assets classes, Data Centres have been attracting higher interest as the sector is anticipated to double its capacity from 499MW as of H1 2021 to 1007 MW by the finish of 2023. The pandemic has accelerated the demand for third party DC sector. Investors and DC players have enhanced their commitments through the last 6 months to set up new information centres indicating robust development prospective. Investment plans to the tune of $3 billion highlight the development prospective of this sector.
Mumbai, NCR-Delhi and Bengaluru attract 77% investments through Q3 2021
Mumbai with enhanced investments in the DC sector and capital flow in pick residential projects led the investment pie with a 39% share. Bengaluru recorded entity-level investment in a mixed-use (residential and industrial) project major to a 19% share whilst NCR-Delhi with transactions in the residential and warehousing segment also had a comparable share. Office space transactions have been muted due to a most likely delay in the due diligence method and investors gauging the unfolding of work from the workplace situation.
Outlook – financial tailwinds to spur investments in last quarter of 2021
Progress in vaccination and continued fiscal stimulus are critical tools for restoring normalcy and assure financial development lost through the pandemic period.
Few investment themes anticipated to continue
The listing of future REITs by institutional investors is anticipated to drive portfolio creation across classes, whilst current listed REITs would expand their current portfolio via inorganic development. Institutional funds with diversified portfolios across assets and geographies are most likely to list sooner. Investors are most likely to focus on assets steady rental development to assure visibility of revenue. Though workplace assets will continue to attract maximum investments, defensive assets like logistics and information centres would provide possibilities and are anticipated to acquire traction. The Industrial and warehousing space sector will continue to attract investors at the development stage to maximize yields as the sector is anticipated to advantage from e-commerce and third-party logistics (3PL). As the Indian colocation information centre sector size is anticipated to double by 2023, it is anticipated to witness larger capital flows to fund the expansion plans of DC operators.