Developers and Investors Consolidate CRE Portfolio in India

Investment in India’s commercial real estate (CRE) market is at an all-time high with local developers as well as foreign investors favoring the sector. The CRE sector has witnessed a flurry of activities this year as developers have been keen on expanding their portfolios through fresh investments and acquisitions. With the first real estate investment trusts (REITs) expected to be listed in December, many developers are expected to join the bandwagon to monetize their existing portfolios.

Major Investments in Commercial Real Estate

So far in 2017, the commercial real estate sector has witnessed a whopping $2 billion worth foreign investment. Experts foresee another $1.4 billion of foreign investment entering the sector to develop and acquire commercial assets. Moreover, Rs. 3,200 crore is being invested by domestic funds to buy office projects and the country’s India’s first REIT is also expected to raise Rs. 6,000 crore in December.

Big-ticket Deals

This year has witnessed a plethora of big-ticket deals including DLF’s announcement to sell stake in its rental arm for Rs. 11,900 crore. Earlier this year, Xander and Dutch pension fund asset manager APG Asset Management NV bought an IT SEZ in Chennai for $350 million. In another major development, Blackstone bought a 15 percent stake K Raheja Corp’s office projects for around $250-300 million.

Local Developers Expand Portfolio

Even as foreign investors pump money into the country’s commercial space sector, local developers are also consolidating by expanding their portfolio. RMZ Corp plans to raise $1 billion and invest through the RMZ Office Development Fund and expand its assets from 21 million sq. ft. to 60 million sq. ft. over the next five years. Xander Group Inc. also plans to beef up its office portfolio after an investment of $400 million.

Going forward, institutional investors are expected to remain bullish on leased commercial assets due to lower vacancy levels and the forthcoming listing under REITs. Central business districts (CBDs) of key cities such as Bengaluru, Mumbai, and Pune continue to remain the favored locations for investment in office assets. With persistent demand for Grade A offices from IT, BFSI, manufacturing and e-commerce sectors and limited supply these locations will remain on the horizon of foreign and domestic investors.

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