Institutional Investments to Touch US$50 Billion Mark in 2019: JLL Study

Foreign institutional investors account for a major share of investments in Indian real estate since the opening of FDI in 2005

●        Rising transparency in the market has attracted investors, including both domestic and overseas ones

●        REIT-able office stock in the country to garner USD 35 bn of investments in near term

●        Other than traditional real estate, Country offers investment opportunity across other alternative asset class such as student housing, flex spaces etc.

Path breaking policies, relaxation in investment norms relating to foreign direct investments (FDIs) and institutionalisation of investments in completed properties in the form of Real Estate Investment Trust (REIT) has opened doors for investors, both domestic and foreign over the last decade, said JLL, the largest professional services firm specialising in real estate, in a statement released today. As a result, the sec tor will see a cumulative institutional investment of USD 50 billion in 2019, which includes both foreign and domestic investments, the study added.

“India real estate has gradually transformed into a global investment destination over the past decade. Since the time the government opened the FDI in March 2005, the country has been able to provide a conducive environment for investors. As a result, we have witnessed reforms relating to ease investment regulations in affordable housing, infrastructure and construction sectors. Above all, like other developed countries, India not just regularised the real estate sector but also brought in a law to institutionalise investments in ready commercial assets through REIT rules,” said Ramesh Nair, CEO & Country Head -- India, JLL.

India’s commercial office segment has been the favourite asset class of institutional investors over the years. They have allocated USD 17.6 bn in the form of direct investments during 2005-2019. JLL research indicates that 294 mn sq. ft. of office stock would be eligible for REIT. This would translate to an additional investment opportunity of USD 35 bn in near term.

“Alternatives segments including student housing, co-living and education real estate are growing and have got the investors’ attention. Additionally, investors and occupiers are lookin g at fast growing flex spaces segment in the country. With rising demand, all these new segments of development have added value to the overall investment potential,” added Nair.

“Operators within these segments now offer multiple formats to occupiers. These range from entire buildings dedicated to co-working spaces to built-to-suit co-working offices within the conventional workplaces. With the benefits of cost reduction and shared amenities, the segment provides a tremendous business potential to all – developers and occupiers,” he added.

As per JLL estimates, currently, there are approximately 325 to 330 co-working operators in the top seven cities in India. The study finds that the average size of transactions in the co-working segment increased from 37,000 square ft in 2017 to 52,000 sq ft in 2018 and further to 97,000 sq ft in the first half of 2019.

Globally, the evolving nature of workplaces and human experience have become core to the office sector. The shift in perception amongst millennials to ‘sharing’ instead of ‘owning’ has made the co-living concept popular.