Institutional investors deployed $1.357 billion into the Indian industrial genuine estate industry in the second quarter (April-June) of 2021, representing a nine-fold raise year-on-year, according to JLL’s ‘Capital Markets Update Q2 2021’ report released today. Capital deployments in the April-June period represented the most active second quarter in 5 years.
According to JLL, the pace and volume of investments more than the previous decade have been supported by the introduction of Real Estate Investment Trusts (REITs) in 2014, the Real estate Regulation and Development Act in 2016 (RERA), the Benami Transactions (Prohibition) Act, and progressive relaxation in foreign direct investment norms more than the years.
“Despite the second wave of COVID hitting India in April this year, the first six months of 2021 saw investments of $2.7 billion, which is 53% of the total investments seen in 2020. Investors are showing resilience and are adapting to the uncertain environment. Relaxing lockdowns during the first three months of 2021 also gave investors a first-hand experience of the post-pandemic world. This led to risk re-rating and asset allocations witnessed a subsequent change in Q2 2021,” mentioned Radha Dhir, CEO and Country Head, India, JLL.
“The first half of 2021 saw broader investor participation and although the economic dent created by the second wave will lead to slower growth in 2021, investments in real estate are expected to maintain momentum. From where we stand, institutional investors have passed the litmus test of resilience during pandemic resurgence and are expected to commit more capital in 2021,” she added.
“The warehousing and logistics sector has been the biggest beneficiary during the pandemic and attracted total investments of over $1 billion during Q2 2021. Warehousing accounted for 55% share while retail formed 20% of total investments during the quarter. In addition, the data center industry has been drawing strong operator and investor interest with various funds exploring entry strategies,” mentioned Dr. Samantak Das, Chief Economist and Head of Research & REIS, India, JLL.
A mix of defensive and opportunistic investments dominate Q2 2021 bargains
Investments in the warehousing and logistics sectors had been appealing due to the rising shift to on line buying from discretionary to essentials. Major worldwide funds have invested with warehousing developers and operators as scale and regional footprint are the essential differentiators in the sector. Some funds are following opportunistic methods by investing in marquee retail assets and have been selectively investing in nicely-established malls.
Investment focus shifting from area to asset portfolio
The shift in investment approach from precise assets to platform kind investments with marquee developers has led to a shift from asset and area to the portfolio strategy. Since most warehousing, as nicely as retail assets, are also situated in tier 2 and 3 cities apart from main metros, the share of ‘Pan-India’ has been gaining prominence.
Outlook
The investment trends for the last 3 months underline one essential trend – Strong investor self-assurance in the Indian genuine estate sector. The knowledge gained more than the previous year has helped investors to deal with the more extreme resurgence of Covid and will guide future course. Though the financial dent developed by the second wave will lead to slower development in 2021, investments in genuine estate are anticipated to remain sturdy by means of the year.
Defensive sectors like warehousing and information centers are most likely to achieve center stage, even though workplace assets will achieve interest with more visibility on work from workplace trends. The REITs industry is anticipated to get a additional increase as the reduction in lot size of REIT units is anticipated to drive more retail participation. The development prospects of the information centers are anticipated to attract capital at the development stage with ambitious expansion plans by the information center players. Institutional investors have passed the litmus test of resilience in the course of pandemic resurgence and are anticipated to commit more capital in 2021.