Institutional real estate investment in India up 17% YoY in Q3 says JLL report

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Institutional investment increased by 17% year on year (YoY) in Q3 2021 (July-September), as investors continued to complete transactions despite resurgence-related uncertainties and disruptions, according to JLL’s ‘Capital Markets Update Q3 2021’ report.

That said, when compared to Q2 2021, quarterly volumes are down by 47% sequentially. Investments recovered more quickly during the first nine months of 2021, with total deals totaling USD 2,977 million, compared to USD 1,534 million in the previous year.

Here, institutional real estate investment includes family offices, foreign corporate groups, foreign banks, proprietary books, pension funds, private equity, real estate fund-cum-developers, foreign-funded NBFCs, and sovereign wealth funds.

Key findings

-The slow growth in transactions is most likely due to deal-related delays caused by travel restrictions. However, some long-term funds have increased their risk tolerance by investing in opportunistic asset portfolios.

– Investors across India are expected to take cues from the improvement in operational metrics across asset classes, as commercial office space net absorption increased by 8% year on year to 5.85 million square feet in Q3 2021, while residential sales increased by 65% sequentially to more than 32,000 units.

“Close analysts of investments during Q3 2021 reveal that it has been more balanced with the residential sector accounting for 29% of the total investments, followed by alternative sector – Data Centre (DC) accounting for 22% share. The mixed-use project of residential and commercial accounted for 19% of the total investments. Investments during the quarter have been broad-based as compared to investments in only two sectors during Q3 2020,” said Lata Pillai, Managing Director and Head, Capital Markets, India, JLL.

“The Reserve Bank of India (RBI) – India’s central bank has kept the policy rates unchanged despite inflation concerns as sustained nurturing of economic growth remains a priority. It has maintained its GDP growth forecast at 9.5% for the financial year 2021-22, expecting strong economic growth in coming quarters,” she added.

– Few investment themes are predicted to persist, like the listing of future REITs by institutional investors is expected to stimulate portfolio development across asset classes. In contrast, existing listed REITs are projected to increase their portfolios.

-Institutional funds that have a diverse mix of assets and geographies are more likely to list sooner. Investors have the potential to prioritise sustained rental growth in order to ensure income visibility.

-While office properties will continue to garner the majority of investment, defensive assets such as logistics and data centres will offer opportunities and are predicted to gain traction.

-Industrial and warehousing space will continue to attract investors during the development stage to maximise returns, as the sector is likely to benefit from e-commerce and third-party logistics (3PL).  JLL is a global leader in professional services focused on real estate and investment management.