Indian equity investments in real estate scaled a new high

V Nagarajan

Buoyed by the robust recovery of the Indian real estate sector, equity investments in the sector grew by nearly 33 per cent year-over-year (Y-o-Y) in 2022 to $7.8 billion.

These are the highest annual investment inflows recorded in India until date, exceeding the pre-pandemic (2019) levels by over 22 per cent, according to CBRE survey.The strong momentum seen in deal closures continued in 2022, with about 125 deals reported, as compared with 123 in 2021. The average deal size has also inched up to nearly $62 million in 2022 from about $48 million recorded in 2021, registering a strong growth of about 30 per cent year-over-year. Mid-sized deals (ranging between $10-50 million) accounted for a major chunk (57 per cent) of the total investment inflows recorded in 2022.

On a cumulative basis, the real estate sector has seen nearly $32 billion worth of equity capital flows since 2018, with average inflows of over $6.0 billion per year.

Office sector remains the most preferred investment bet. Together, site/land parcels (48 per cent) and the office sector (35 per cent) accounted for nearly 83 per cent of the investment flows in 2022.

The retail sector’s share in investments shot up to nearly 13 per cent from almost negligible in the previous year.  A five-year (2018-22) data analysis revealed that the office sector remained the mainstay of investors, particularly foreign institutional investors.

This was closely followed by acquisition of sites / land parcels, which saw deployment of over $12 billion, translating into a share of about 38 per cent in cumulative investments.

Institutional investors have consistently been a major source of capital deployment in Indian real estate. They accounted for over 42 per cent of investments in 2022, followed by property companies (over 32 per cent).

In terms of sectoral bets, institutional investors have primarily infused capital to acquire the built-up office assets, which have garnered a share of over 56 per cent ($9.8 billion) in their total investments.

A strong rebound was seen in office leasing in 2022, led by pent-up demand – this also resulted in strong investment inflows into the sector.

Investment in Greenfield developments through acquisition of sites / land parcels totalled over $2.5 billion, accounting for a nearly 15 per cent share. Retail witnessed capital deployment of nearly $2.0 billion, which is more than 11 per cent of the total inflows. Over a dozen new foreign investors are betting on Indian real estate; more are expected to follow suit.

Over the past five years, over a dozen foreign institutional investors, asset managers and developers have forayed into the Indian real estate sector.

Of these, a majority of the investors were based in the APAC region in countries such as Japan, South Korea, Singapore and Australia.

Also, key investors who were previously not heavily invested in the RE space in India have started to view the sector favourably and have upped their bets through acquisitions and partnerships.

Investors will continue to allocate capital towards Greenfield as well as built quality office assets through large platform deals, with greater preference for sustainable assets.

Foreign investments in industrial assets also have been on the rise. Foreign investments constituted 87% of the total investments received in industrial and warehousing during 2017-22 period. Industrial sector is witnessing consistent growth owing to increased opportunities in manufacturing, favorable government policies and growth in E-commerce, leading to a significant amount of investible assets in the region.

My family members entered into a JD agreement with a developer but there has been delay in completing the project. What are the options available to resolve it? Please advice. Sharan Gouda, Sharjah

It is necessary to examine the clauses in the joint venture agreement to find out more information on the spirit of the agreement. Normally a default clause is included to pay compensation for such delays beyond the agreed period. In such a case, you can straight away lodge a claim. In the event of such a clause not included in the agreement, you need to make a representation after assessing the loss incurred over the delay in completing the project.  If none of the above attempts yield the desired result, then you can approach the court for remedial measures depending on the stage of the construction, amount due to you as per the agreement, etc.

While gifting immovable property, when does the receiver gets it legally in his possession? Royan Pereira, Abu Dhabi.

Gifts should ideally be received along with details clearly demonstrated by the donor. As regards immovable property, it should be accompanied with a registered gift deed. Once it is registered along with a gift deed, the receiver of the gift will get the legal ownership and right to possession of such property.