Industrial and office segment dominate Indian investment pie

V Nagarajan

Industrial and office segment dominate the investment pie in India. The second quarter saw an investment volume of Rs106 billion ($1.4 billion). Though second quarter fund flows declined by 28.6 per cent q-o-q, the first half of 2021 ended strong with Rs254.6 billion ($3.5 billion).

In fact, investment volume in H1, 2021 grew by a multiple of more than 4X over the previous half year. Foreign investors accounted for close to 75 per cent share of the Q2 investments, says a survey by Cushman & Wakefield.

Blackstone led the largest transaction for the second quarter with the PE major solidifying its hold in the industrial space with acquisition of Embassy Industrial Parks from the Embassy Group – Warburg Pincus alliance.

The segment which is emerging very fast is continued to be looked at favourably by investors on the back of high growth of e-commerce sector. Xander group marked its foray in eastern India by acquiring a logistics park in Bagnan, West Bengal as part of their industrial platform. Mapletree Logistics Trust announced the acquisition of two logistics assets in Pune with healthy occupancy with an established zone for engineering and automobile industries.

Industrial segment that accounted for 57.1 per cent share of the Q2 investments was followed by office segment constituting a 24.4 per cent share. CPPIB and RMZ entered into a joint venture to develop assets in Hyderabad and Chennai identifying three projects in these cities. In another key transaction, Godrej Fund Management bought a land parcel in Bengaluru from Puravankara. This is part of the fund’s strategy to develop key office assets across prime locations, with a land parcel bought in Pune last quarter.

Residential segment held close to 17 per cent share in the Q2 fund inflows with ASK Group, PAG, JM Financial making investments with well-known developers across cities. The segment also saw HDFC Capital and Cerberus Capital forming a $1 billion special situations platform targeting to provide last-mile funding to under-construction residential projects in the country. Investment interest was also seen in the non-traditional asset classes with Cerestra Advisors and the family office of Kolte Patil Group acquiring a boarding school in the National Capital Region.

In a continuing trend, equity investments accounted for a 77.2 per cent share in Q2. Investors have shown a keen interest for office and industrial assets with development potential in top cities on account of expectations of strong leasing demand in these locations.

Everstone-backed Indospace, Ascendas India Trust, Godrej Fund Management have been instrumental in such investments.

In a key alliance during the quarter, Singapore’s sovereign wealth fund GIC and Phoenix Mills Ltd formed a $0.73 billion investment platform for retail and office assets.

The retail-led, mixed-use portfolio of projects under this platform will be located in Mumbai and Pune among others.

At a city-level comparison, multi-city investments had the highest share of 63.2 per cent in the private equity inflows for Q2 with Blackstone Group and CPPIB being leading investors.

Mumbai and Pune held a 9 per cent share each, followed by Bengaluru with 8.3 per cent share in the Q2 investments.

I have let my office for warehousing as I could not continue the profession due to slowdown. There is a notice from the assessing officer that it will be treated as business income and not income from property. What is the correct status? Sharan Gouda, Sharjah.

In the instant case, you have not constructed a specialised infrastructure facility to exploit for commercial gains and also not provided allied services. As a passive receiver of income derived from the exercise of your property rights only, it is appropriate that your income would be assessable as ‘income from house property’.

The decisive test is the true nature of activity carried out by you which produces the income from warehouse. The issue of chargeability as to business income vis-à-vis income from house property has to be examined on the facts of each case independently.

My relative recently expired in Pune without leaving a Will. What are the implications on his savings and immovable assets in India? Vishal, Dubai.

In such a scenario, the intestacy laws of the state where your relative resided will determine how his property should be distributed upon his death including bank accounts, securities, real estate and other assets.

Again, the laws of intestate succession vary greatly depending on whether he was single or married or had children. In many cases, his property will be distributed in split shares to his “heirs” as provided in the Hindu Succession Act.