The alternative investment fund (AIF) space has witnessed the sharpest growth in the investment industry in the past five years with over 50% compound annual growth rate (CAGR) as of FY22. This shows the potential for capital infusion in the sector. We believe the increase in discretionary income and better financial knowledge along with digitisation of a traditionally offline investment avenue has and will continue to be the key growth factors for MYRE as well as the entire industry, says Aryaman Vir, Founder and CEO, MYRE Capital.
In an exclusive interview with Sanjeev Sinha, Mr Vir gives his views on why India’s commercial real estate has become a preferred choice for investors, and shares his business outlook. Excerpts:
The housing segment is said to have done very well in 2022. Has there been the same case for commercial real estate as well? What are the reasons for growing investments in CRE?
India’s commercial real estate (CRE) has been the ‘blue eyed boy’ for global private equity funds and HNIs. Due to the high-ticket size required to acquire an A-Grade CRE asset, retail investor participation has traditionally been limited. Today, fractional ownership offers retail investors unprecedented access to such opportunities at reduced investment minimums. Fractional ownership is a robust framework that is being utilised to democratise CRE investments and ownership. Starting with 25L, a retail investor can now own a fraction of some of the most marquee institutional-grade commercial real estate developments in India.
According to JLL, the Grade A office market is likely to touch 1.2 billion square feet by 2030, owing to surging demand. With organisations moving to a hybrid model, office spaces will be in demand, especially for the startup community. In addition, financial stimulus for certain leading sectors like IT/ITES will drive the growth for opportunities.
Apart from more opportunities in the market, the capital available for investment is also increasing. The alternative investment fund (AIF) space has witnessed the sharpest growth in the investment industry in the past five years with over 50% compound annual growth rate (CAGR) as of FY22. This shows the potential for capital infusion in the sector. We believe the increase in discretionary income and better financial knowledge along with digitisation of a traditionally offline investment avenue has and will continue to be the key growth factors for MYRE as well as the entire industry!
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What about the growth of your company?
We have had phenomenal growth at MYRE in 2022. We started operations just two years ago, in the beginning of 2021, and have witnessed immense interest from emerging HNIs and accredited investors in alternative investments in commercial realty, beyond traditional investment options into equity or debt. Over the last two years, our business growth has been exponential with us crossing an AUM of Rs 220 croreand a user growth of over 130% in 2022. Our investor portfolio has been a mix of NRIs, senior tech & law professionals, CAs, and even second-generation entrepreneurs.
We are excited to provide unprecedented access to a carefully curated selection of investment opportunities, enabling investors to diversify their investment portfolios with real estate. We also explored a first-of-its-kind structured debt opportunity for our investors this year under the new Lease-Rental Discounting model. Investors received the opportunity very enthusiastically with us closing 90% of the total size within a week.
This now brings us to a total of six properties managed by MYRE for its investors across five cities – Maker Maxcity & Times Square in Mumbai, Vaishnavi Techpark in Bangalore, Phase III Okhla in Delhi-NCR, Magarpatta City Township in Pune, and Lease-Rental Discounting opportunity in Hyderabad. Full occupancy from investors for these prospects is a testament of users’ belief in fractional ownership and innovative alternative investment opportunities brought by MYRE to investors.
What is your 2023 outlook for commercial real estate in general and your organisation in particular?
We believe India’s commercial real estate (CRE) market has huge potential for growth. There are four big reasons for the increasing awareness and trust on fractional ownership – High Rental Yields, Capital Appreciation, Real estate being a capital preservation tool, the returns not being closely related to stocks and bonds market. With more and more investors understanding the options that this asset offers, we are aiming to further increase our growth by4.5X to 5X – increasing our AUM from Rs 220 cr to Rs 1000 cr in the next calendar year. The faith that our investors have placed in us leaves us feeling incredibly humbled. This encourages us to broaden our horizons and make a substantial contribution to the democratisation of the real estate industry.
Now even Millennials are gravitating more and more toward fractional ownership because of the digital transformation of real estate. This is the upcoming major wave that MYRE Capital is spearheading in the world of property-investment technology. CRE continues to be a lucrative asset class with a strong risk-return proposition for investors. As fractional ownership platforms such as MYRE continue to democratise the asset class and increase awareness, the demand and overall investor segment for this category will continue to increase.
In order to offer products that are unique and have various risk-return profiles, the company is also intending to introduce more investment verticals in the upcoming calendar year. We aim to become a full-service alternative real estate investment platform. For providing our investors with the finest of opportunities in the market, we are also looking at investing into high-end research and technology, this year. We are also looking to hire aggressively and 3x our team strength in the upcoming quarter across roles like sales, finance, legal and others.
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What steps MYRE Capital is taking to safeguard the interest of your residential and NRI investors?
The biggest indicator of growth we have seen is the time taken to fund our opportunities. At the beginning of the year, an opportunity took an average of 40-45 days to close and it has come down to 25 days with majority of the funding closed with the first few days of launch. Along with this, we have also noticed major interest from NRI investors with some of our properties being funded from over 16 countries. To understand this behaviour better, we had launched the MYRE Neo-Realty NRI survey in May 2022, which showed us that NRIs are more likely to invest in their origin city and around 50% of these NRI investors are millennials. We believe this growth and interest is majorly due to the digital transformation in the real estate space enabling transparency and security to the overseas investors.
To make sure our residential and NRI investors’ interest are safeguared, MYRE Capital first shortlists the assets based on stringent criteria involving predictive analytics across 150+ data points, 25 years of industry expertise, and proprietary technology solutions. MYRE leverages its industry relationships, IPC partnerships, and proprietary data insights to identify opportunities. Each opportunity is then evaluated in real-time using automated AI/ML algorithms and big-data insights. Post selection only, the opportunity is listed on MYRE’s platform with entire details about the micro-market fundamentals with the target returns. All opportunities are secured by collaterals of the operator and even personal guarantee in some cases. We personally invest in all opportunities so we also have the skin in the game. Investors are provided with real time secured dashboards with investment details and updates in a transparent manner.
Why alternative asset classes should be a part of an investor’s portfolio?
Investors are drawn to alternative investments because they have the ability to diversify portfolios, which would increase the portfolio’s risk-adjusted return. Alternatives contribute to the achievement of this objective largely by lowering risk and generating robust returns that are often less associated with conventional equities and bond markets. In this context, investment in commercial real estate (CRE) has a conservative risk profile similar to bonds/FDs by giving a stable & predictable rental income (8%-10%) with an underlying hard asset. CRE has a lucrative return portfolio similar to equities by enabling high returns with annual capital appreciation typically being 15-25% IRR.