Covid-19 Impact On Institutional Investments In Real Estate Was Minimal, Says JLL
The Covid-19 pandemic may have stalled the Indian economy last year but its impact on investments in the real estate sector was minimal.
That’s according to a report by released by the real estate consultancy JLL on Jan. 21, which said funding by institutional investors in the segment stood at $5 billion in 2020—a 7.4% drop a year ago. The number of such transactions, at 93% over a year ago, too, showed only a marginal decline.
The report, named “Capital Markets Update: Q4 2020”, attributed the trend to a pick-up in such investments in the fourth quarter of last year amounting to $3.5 billion.
The comeback in 2020, the report said, holds significance when seen against the pace and percentage of recovery from the last global financial crisis. Not only did the post-global financial crisis recovery phase take more than three years, but the drop in 2009 was more than that witnessed in 2020, the report said.
“Over the years, investments have moved in tandem with reforms and maturity in the real estate sector,” it said. “Moreover, various structural reforms during the last decade have brought much-needed transparency and accountability to the sector.”
A deeper analysis of institutional investments in 2020 indicates that the recovery has been narrow-based, as 27 deals were transacted in 2020 over 54 in 2019, the report said. “The two large portfolio deals with an estimated value of $3.2 billion accounted for 65% of the total investments in 2020,” the report said. “These investments by large global funds in times of uncertainty validate the investment potential of Indian real estate.”
The two major deals in 2020—Blackstone Group taking over 21 million sqft of completed and under construction office, retail and hospitality assets from Prestige Estate Projects Ltd. for $1.2 billion; and the Brookfield Group’s agreeing to acquire around 12.5 million sqft of office and co-working assets from RMZ Developers for around $2 billion—indicate that office assets account for a major share of the portfolio deals, the report said.
“India’s office sector has witnessed continuous growth over the last four years with the average annual net absorption crossing 30 million sq. ft, leading to steady rentals and capital appreciation till the onset of the pandemic,” Samantak Das, chief economist and head of research & REIS (India) at JLL, was quoted as saying by the report. “Global investors, looking for stable yields and regular returns, believe that the technology sector driven office space demand is expected to grow further and keep absorption robust.”
Bengaluru, the report said, attracted maximum investments in 2020. “India’s Silicon City is home to major global as well as domestic technology players, technology start-ups and global in-house centres of multi- national companies. The two large transactions accounted for most of the city’s office assets, leading to a 74% share of investments in 2020.”