Indian real estate attracts $14 billion of foreign PE during 2015-2019

V Nagarajan

Indian real estate attracted nearly $14 billion of foreign private equity (PE) between 2015 and the third quarter (Q3) of 2019, according to latest Anarock data.

Out of total foreign investment, 63 per cent (approx. $8.8 billion) commercial property dominated investment category. The residential sector attracted just $1.5 billion of foreign PE investment in the same period, trailing behind even the retail sector which saw cumulative inflows of $1.7 billion.

In stark contrast, domestic PE funds pumped nearly $2.4 billion into Indian real estate since 2015, of which nearly 71 per cent (approximately $1.7 billion) went to the housing sector. This was a period of considerable stress for the residential segment; domestic funds invested heavily into a sector plagued by issues like delayed/stalled units, low sales and fairly lower yields. This made exiting investments with substantial gains difficult.

The commercial real estate segment, on the other hand, delivered a comparatively stellar performance in the last five years. Steady demand and rising rentals gave foreign investors a decisive edge.

Moreover, the overwhelming response to Embassy Office Parks’ REIT launch saw commercial real estate segment emerge as the bigger draw for investors. Several other large developers are also keen on listing their commercial assets under REITs.

An additional infusion of $1.6 billion between 2015 and Q3, 2019 was a mix of foreign private equity and funding by Indian developers or investors who collaborated either at project or entity levels. For instance, in 2018, Canada’s CPPIB and India’s Phoenix Group together invested nearly $100 million into a mall project in Bangalore.

Indian commercial real estate will continue to attract PE funds as there is high demand for Grade A office spaces across the top Indian cities. Earlier data indicated that the first three quarters of 2019 alone saw inflows of $3 billion in the commercial segment - an increase of 43 per cent over the corresponding period in 2018.

Logistics, warehousing and retail will continue to witness considerable growth on the back of recently-eased policy norms for the retail sector, aimed at boosting growth and attracting more investments.

According to Anarock data, residential segment drew approx. $295 million PE funding in the first three quarters of 2019 (against $210 million in the corresponding period last year). Though this constitutes an impressive 40 per cent annual gain, investments are still far below the 2015 peak levels of 2015, when housing drew PE investments of approx. $1.5 billion.

My father has left a Will bequeathing his property among his children. Is registration of the Will compulsory? Please clarify. Santhosh, Sharjah.
Registration of a Will is not compulsory and no inference can be drawn against the genuineness of a Will on the sole ground of its non-registration. However, registration of a Will is desirable as there are inherent advantages. For instance, Will cannot be tampered with as it is kept in the safety custody at the office of the sub-registrar.

No one can examine the Will and copy the contents without the written permission or until the death of the testator. Further, if the Will is registered and uncontested, it may be possible to get the leasehold property mutated in the name of the legal heirs without obtaining a probate of the Will.

During the recent visit to Gulf, a developer has offered apartments with assured rental income in Bengaluru. Is it safe to invest in such properties? Anurag Kashyap, Dubai
There is a surge in demand for rental housing among corporate looking for accommodation in the vicinity of their operations. The developer may have got a mandate to ensure availability of apartments in his project for rental accommodation.

It is safe to invest in such units as investors get return on investments from day one and housing finance companies and banks also offer home loans to invest in such units. However, you will have to follow the ground rules and take a closer look at the lease period, escalation clause in the rent at periodical intervals and other factors.

We have an ancestral property in Pune and one of our relatives had sold the property including the shareholding of others without their knowledge. What is the legal remedy available? Rohit Kothari, Dubai
As regards ancestral property, the basic requirement while investing is to get the consent of all the co-owners. One of the co-owners cannot arbitrarily take any decision unless he has been given power of attorney and authorised by all the co-owners.

However, he can sell his undivided share of the property but not the entire property on his own discretion. You will have to file a suit for partition of the property in order to get your share of the ancestral property.