By Raghavendra Kamath
Global investors are looking to put billions of dollars into Indian real estate again as they see improvement in both residential and commercial segments.
From Abu Dhabi Investment Authority (ADIA) to Goldman Sachs to CPPIB, a number of global investors are either tying up with Indian fund managers or developers to take part in India’s real estate sector.
ADIA, one of the biggest sovereign funds globally, is looking to invest in the new fund structure of Kotak Investment Advisors, the private equity arm of Kotak Mahindra group. The fund will lend to residential projects and developers, sources in the know said.
According to sources, ADIA, which held assets under management of $829 billion at the end of 2021, could invest as much as $1 billion (Rs 7,600 crore ) in the Kotak fund.
“Given the pick-up in residential sales, both investors think it is a right opportunity to invest in residential projects,” said sources.
When contacted, ADIA spokesperson declined to comment. A mail sent to Kotak did not elicit any response.
ADIA has an exisiting relationship with Kotak. In 2019, Kotak Investment Advisors raised $500 million from ADIA as an anchor investor for a distressed assets fund.
ADIA is also a primary investor in the $1.88-billion H Care-3 affordable housing fund of HDFC Capital. The initial close of the fund was announced in January this year.
Another global investor Goldman Sachs is looking to invest $2-3 billion in Indian real estate in the next three years, said sources.
Goldman Sachs is also in advanced talks with developers in Mumbai and Bengaluru to set up investment platforms in residential and commercial real estate, sources said.
“GS wants to do both equity and debt deals though it has done mostly debt deals in the last couple of years in real estate,” sources said.
Goldman Sachs has hired Mukesh Tiwari from Actis to head its Indian real estate business and is expanding the real estate team, sources said.
An e-mail sent to Goldman Sachs did not elicit any response.
Earlier this week, Canada Pension Plan Investment Board announced a new joint venture with Tata Realty & Infrastructure to develop and own commercial office space across the country. The joint venture will target ready and development assets, aiming to reach over Rs 5,000 crore in assets under management.
In March this year, CPPIB also floated a second JV with Bengaluru-based RMZ group to set up and hold office spaces in key cites in the country. CPPIB said it will invest Rs 2,650 crore in the joint venture with RMZ
“The funds are encouraged by an increase in demand in residential, data centre and warehousing segments and corporates returning to offices. Hence, putting large sums in the Indian real estate market,” said Sanjay Dutt, managing director at Tata Realty & Infrastructure, which announced a JV with CPPIB recently.
Dutt added that the way India managed Covid overall and a sharp rise in economic activities and related hiring giving a boost to job markets have helped.
Saurabh Shatdal, managing director, capital markets at Cushman & Wakefield, said the success of the three REITs (real estate investment trusts) has helped the sector weave a very strong story globally. “REITs have not just institutionalised the space but also emerged as a strong value-creation strategy for investors. This has helped the sector attract variety of pools of global capital to look at Indian RE favourably,” Shatdal said.
Residential sales have picked up significantly across cities and developers have reported strong pre-sales numbers this quarter. Commercial leasing was close to 12-13 million sq ft in Q1, which is signalling a strong revival in the space, he said.
First quarter of the year (January-March 2022) has seen quarterly sales attain a four-year high of 78,627 residential units despite the third wave, said consultant Knight Frank India in a recent report
Shatdal said that investors have always preferred platform-level trades to deploy capital because platforms help investors participate in assets that are across the development cycle thus balancing the risk-return matrix. Investors today are ready to back developers who have a strong delivery track record, professionally managed business and high levels of corporate governance.
Shobhit Agarwal, managing director of Anarock Capital, said that apart from the remarkable return from the housing market, India now has a firmly established REIT market which is very interesting for investors. “Moreover, the logistics and warehousing sector has picked up tremendously after Covid-19 boosted the e-commerce sector. Data centres as an asset class is another exciting emerging sector. There is every reason for both foreign as well as domestic investors to look at Indian real estate very seriously now and in the future,” Agarwal said.
He expects that the Indian real estate market will attract $7-8 billion from global investors annually.