Stressed real estate assets bring new investment opportunity to institutional investors

With the real estate industry going through a rough patch since the last few years, institutional investors can find lucrative investment opportunity. Particularly, the residential market in real estate offers a lot of opportunities to investors. The institutional investors have already invested more than $1 billion in stressed properties. In the coming years, this type of investment is likely to gain pace as the IBC (Insolvency and Bankruptcy Code) law, which was introduced back in 2016, is getting firmly established in the country.

Real estate assets are being liquidated by corporates which are burdened with huge debts. This has resulted in a greater number of investment opportunities in private equity. Presently, the investors are evaluating different options, including distressed sale, acquiring assets that are non-performing and entity-level stake.

One of the important trends reveals that investors are gaining more interest in investing in stressed assets. Recently, Café Coffee Day Enterprise struck a $385 million deal, involving the sale of a Bangaluru-based IT park, aiming at minimizing the debt. Blackstone and Salarpuria Sattva Developers have also acquired the Global Village Tech Park, focusing on the IT industry, which was developed over 90 acres,

Presently, the institutional investors are providing the capital commitment, which is important for the lenders. The deals can be settled at a much faster speed, as compared to before. These deals also bring an opportunity to the investors to get their returns optimized in accordance to the underlying risks.

The housing sector also provides good investment potential to the investors. This category of real estate in India has the maximum number of stressed assets. The industry is suffering from stalled and delayed projects. Presently, more than 4.54 lakh residential units are running behind their respective dates of completion. Besides, some of these projects are under the proceedings of bankruptcy. These projects have an estimated value of $66 billion.

Some of the other elements, leading to a deeper crisis in the real estate industry in India are the NBFC debacle. This has led to the liquidity crisis. The property buyers are now looking for ready-to-move-in apartments. The government has declared that it would be providing a special funding window to bail out these stalled projects.