India Realty Sector Attracts $922 million in Q1, 2021: JLL
Institutional investments continued the momentum during the first quarter (Jan-March) of 2021, registering 21 per cent growth in volumes at $922 million, indicating sustained investor interest in India's real estate market, according to JLL's Capital Markets Update Q1 2021.
Investments during the quarter were driven by more activity from funds and closed development stage deals and were further supported by external macroeconomic factors. However, the pandemic surge during the second half of March 2021 is expected to delay the investment pipeline in the second quarter, says JLL.
"Institutional investment momentum continued during the first quarter of 2021, registering 21 per cent growth in volume at USD 922 million, indicating the sustained investor interest in India's real estate market," Dr Samantak Das, Chief Economist and Head of Research REIS (India) at JLL, said
Commercial Office Space Drives Investment Momentum
Commercial office assets dominated deals with $864 million transacted, translating into 94 per cent of the total value in the first quarter. Office space developers liquidated their portfolios to deleverage or raise growth capital for the next phase of expansion. In addition, investors are actively scouting for warehousing assets at present and deals are likely to be concluded in the coming quarters. The housing sector, meanwhile, continues to experience an infusion of last-mile funding for project completion.
Hyderabad Leads Investments with 42% Share, Followed by Mumbai at 21%
Hyderabad witnessed the highest capital flows of $384 million, accounting for a 42 per cent share of investments during the first quarter of 2021, due to the launch of new developments by the Phoenix Group. Mumbai accounted for 21 per cent share of investments with $193 million deployed in its office and residential segments, supported by the reduction in stamp duty introduced by the State Government of Maharashtra.
Here are some broad trends are likely to emerge:
- Investors are likely to continue evaluating deals and concluding investment processes with relaxation in conditions
- JLL believes that the listing of more REITs will gather pace in 2021, also influencing the investment momentum
- Apart from commercial office space, recovery in the housing sector is expected to attract funds, especially for projects in the last stages of completion
- Residential sales in Q1 (January-March) 2021 recovered to more than 90 per cent of the volumes witnessed in Q1 2020 (pre-Covid) across the top 7 cities. Smart recovery in demand in 2021 is expected to improve investment prospects. Opportunities for construction finance and last-mile funding would be available
- Entry of new data centre operators and expansion plans of major players supported by infrastructure and PE funds are expected to drive deals
- Platform deals in the logistics sector are likely to remain active as the segment benefitted from growing e-commerce demand as well as pandemic induced demand for cold storage facilities from pharma sector
Institutional investments have stayed on a firm wicket despite the pandemic in 2020 and are likely to gain further pace in 2021
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