Institutional investment in real estate sector trebles in India

V Nagarajan

Institutional investments increased in Indian real estate sector in the last ten years and have improved investor confidence, risk appetite and transparency. Enhanced use of technology across asset classes have changed the outlook of investors towards Indian real estate. As a result, investments have more than tripled to Rs1,400 billion during 2014-18 as compared to Rs465 billion during 2009-13, according to CII-JLL report on ‘Innovation Led Opportunities — Changing India’s Real Estate Landscape’ released recently.  

Traditional real estate segments such as residential and commercial have been using modern technology across construction, planning and development for over a decade now. Policy reforms in the sector, the concept of shared economy giving rise to new asset classes such as co-living and co-working spaces and technology driven businesses resulting in the increased interest in data centres have together made times exciting, both for occupiers and investors. Additionally, introduction of REITs have opened new doors for retail investments in commercial real estate.

 “While metros like NCR-Delhi, Mumbai and Bengaluru accounted for 74% of the total institutional investments during 2009-18, it is expected that tier II and III cities to draw more funds in the coming years. The government’s focus on the growth of smaller cities is leading the change,” said Ramesh Nair, Chairman, CII Realty and Infrastructure Conclave and CEO & Country Head, JLL India.

The report also highlighted that the commercial office segment witnessed the maximum share of institutional investments in the past ten years. Rise in the development of environmentally sustainable buildings and subsequent demand from occupiers have added strength to this trend.

From 2009 to 2013, opportunistic funds returned to Indian markets and picked up marquee assets in select offices (commercial and IT parks/SEZs). India’s improving reforms scenario added value to the overall scenario. Notification of REIT regulations in 2014 led to a deluge of investments in high yielding assets with attractive valuations. This was especially in the non-IT office space as most quality IT/ITeS assets were acquired by funds. Investors took note of the innovation introduced at all levels.

With a superior sustainability quotient, Grade-A offices with single ownership and limited supply have pushed global investors to close large deals. But lower availability of quality assets has led to large investors chasing entity level deals leading to extended investment cycles. As a result, the share of investments in the office segment declined during the first six months of the year as compared to the corresponding period the last year.

I have lost original documents pertaining to my land investment in Chennai during transit. Now I wish to transfer my property to my son in India but registering authority is insisting on production of original documents.  Please guide us. A. Santhosh, Sharjah.

Earlier it was not mandatory to submit original documents but now to avoid malpractices and other associated issues, original documents are insisted upon and verified before registration by the concerned authorities.

In order to effect register the document, you should (1) lodge a complaint before the concerned police station in whose jurisdiction, you have lost the document (2) obtain a copy of ‘not traceable’ certificate from the police station (3) issue an advertisement in the local newspaper to this effect (4) obtain a certified copy of the document and patta and (5) obtain encumbrance certificate from the date of purchase of property to current date. After furnishing all the copies, you can register your property before the registering authority.

I bought two apartments from different sellers and clubbed it for my larger family with one kitchen.  But the assessing officer is questioning the entitlement to save capital gains. Kindly clarify. Shashi Katwani, Dubai.

Generally speaking in terms of section 54 of the Income-tax Act, 1961, an assessee is entitled to purchase only one residential house to save capital gains.  In your case, though two apartments were bought from different sellers the general layout plan may indicate only one common kitchen for both the flats.  Hence, you are entitled to deduction and benefit in terms of section 54 of the Income-tax Act, 1961.

I sold my land recently but only invested capital gains partly in acquiring another asset. How will it be treated for tax purposes? Sumanth, Dubai.

If you invest the whole of your capital gain in certain bonds the whole amount will be exempt. However, if you invest only a part of it, the amount not invested will be subject to tax under the head capital gains.