2021 likely to witness 14.6% rise in institutional investments

An interesting forecast reveals that institutional investments in the Indian real estate sector would be rising to INR 396 billion, growing by 14.6% in 2021. Particularly, asset classes like data centres, offices and warehouses are likely to experience a bullish trend. Evidently, the investments, which presently stand at INR 346 billion, would rise significantly.

As many as six cities of India, including Chennai,Bengaluru,Hyderabad, Delhi NCR, Mumbai and Pune witnessed an annual supply more than 35,000 Sq.Ft. between 2018 and 2020. In most of these segments, institutional investors had been active. Presently, the same kind of asset supply is ready to hit the market. However, certain investment firms are particularly willing to build their own office assets. Although investors are expecting the internal rate of return to be around 17% to 18%, long-term investment avenues would be bullish.

Between 2018 and 2020, office assets constituted for more than 55% of the overall inflows in the real estate sector in India. This reveals the interest and appetite of the property buyers. However, presently the available office stock is limited. According to experts, this is the prime time for funds to make their entry into the market. In the residential sector, investors must explore the maximum amount of funding. Thanks to rebates and low mortgage rates in the market, the residential sector is undergoing improvement.

Property investors who have a long-term horizon may have a look into greenfield data centre assets. As compared to brownfield assets, greenfield assets are capable of yielding better returns. The Tiers 3 and 4 DC asset classes generally offer a higher net yield every year, which is more than other assets. For institutional investors, this might be an attractive option. The powerful DC portfolios of developers, in the next ten years, can be converted into REITs. The intention to invest in assets generating consistent income would lead this trend.

The logistics and industrial warehousing sectors of India are saving a substantial amount of interest from these investors. With the demand for eCommerce and consumer-oriented occupiers rising, the logistics and industrial sectors would be stronger, as compared to other classes of assets. 2021 would possibly foster more joint ventures between investment funds and developers. In the process, they would develop and expand fulfilment centres and industrial parks in Tier I and II locations. Evidently, real estate institutional investments are expected to increase significantly in 2021.