India’s realty investments up 53 per cent in Q3 sequentially

Office space investment appetite remained intact and the segment was the first to bounce back, shows JLL research

By   |  Business Bureau  |  Published: 6th Nov 2020  6:43 pm
Despite an initial setback, market experts are of the opinion that the segment will recover in the months to come.

Hyderabad: India’s real estate market attracted $235 million (about Rs 1,740 crore) in the third quarter of 2020 (Q3,2020), growing by 52 per cent quarter-on-quarter (QOQ), according to JLL. The India real estate sector is expected to draw $4.8 billion of capital in 2020, representing an eight per cent decline on 2019’s total transactional volume of $5.3 billion.

Investors are most attracted to the country’s office sector, with interest remaining strong throughout the pandemic and the partial relaxation of the lockdown with $200 million (about Rs 1,480 crore) invested during Q3 2020. Office space investment appetite remained intact during the pandemic and was the first to bounce back during the partial relaxation of lockdown.

“We’re expecting a broad based ‘V-shape’ recovery in the Indian real estate market, but depending on the economic recovery and pandemic response, our estimates have substantial scope for upward revision. We have already witnessed very positive signs of recovery in the office segment in Q3 with gross leasing at 13.8 million sq ft,” said Ramesh Nair, CEO and Country Head (India), JLL.

Nair added, “The REITs market has done exceedingly well with the combined market cap of the India REITs at $6 billion accounting for 33 per cent of the market cap of listed real estate companies.”

The review of investments in the first nine months of 2020 reveals that out of the $1.2 billion investments, Bengaluru, Chennai and Mumbai together accounted for 71 per cent share. Bengaluru led the pack with 33 per cent share of real estate investments.

“The impact of COVID-19 on the India real estate market has been unprecedented, but investors have remained bullish on the long-term prospects and voted with their deployments in the third quarter. Though we expect 2020 investments level to be marginally lower than 2019, the recovery will not be broad-based given that two large transactions slated to be concluded this year would account for 76% of the total investments estimated for 2020,” said Dr Samantak Das, Chief Economist, JLL.

Path to recovery

Post the Global Financial Crisis (GFC), investments in Indian real estate declined by 71 per cent during Q1-Q3 2009 as compared to the same period in 2008. However, investors after the brief wait came back with lessons learnt.

Investments during Q1-Q3 2010 saw a recovery of 92 per cent. This year, a similar pattern has panned from Q1-Q3 2020 wherein investments declined by 73 per cent although on a higher base.

Green shoots of recovery like a strong response to REITs, large office and retail asset portfolio deals in progress and robust office sector fundamentals indicate that a similar pattern which was witnessed in 2010 could unfold shortly.

Indian real estate has come a long way, post the global financial crisis due to structural transformation as well as regulatory reforms introduced in the last decade.

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