Realty Reforms Boost FIIs Investment In The Sector

The combination of policy and regulation reforms in the real estate sector has increased the risk appetite of global institutional investors as they increasingly switch from income producing, to development of assets.

The trend clearly indicates their preparedness to participate and assume more risk in Indian real estate given the improvement in transparency and their confidence in the Indian real estate space. Investments in development assets have increased over 7 times to $960 million in the current year till date from $135 million in entire 2017, showed data from JLL India.

The last decade or so has been marked by risk appetite of foreign and domestic investors changing across different asset classes in India’s realty sector. Pivotal events such as the Lehman Brothers collapse and the subsequent global financial meltdown were major triggers behind the increased risk perception. Within development assets, office, retail and warehousing have attracted institutional investments. Favourable macroeconomic indicators and improved transparency owing to regulatory reforms in real estate have played a crucial role in catching institutional investors’ fancy for development assets.

This confidence reflects in the total value of institutional investments in the real estate sector since 2014. Investments have nearly trebled to $6.4 billion in 2017 from $2.2 billion in 2014, maintaining that momentum, the first half of 2018 has already witnessed robust numbers, with $3.6 billion worth of investments.

Office markets have been the preferred destination for institutional investors for some time. Foreign funds were first to spot the potential in this space and bought large office assets with attractive yields in view of future public exit via Real Estate Investment Trusts (REIT).

According to experts, developers with long-term vision focus on corporate governance and ability to forge strategic partnerships will benefit from increasing interest in development assets. Rising investor confidence, solid appetite of global investors and inclination of marquee developers for joint venture is likely to usher in more development asset investments moving ahead.