ZCZC
BCN-03
INDIA-REAL ESTATE-DROP
Institutional investment in Indian real estate drops 12% in FY’20 at nearly
4.5 bn: report
NEW DELHI, May 31, 2020 (BSS/PTI) – Institutional investment in Indian real
estate fell 12 per cent to USD 4.48 billion (around Rs 33,800 crore) last
fiscal year on lower economic growth and uncertainty over the coronavirus
pandemic, US-based property consultant Vestian said.
“The fiscal year 2020 saw a total institutional investment of USD 4,480
million. This depicted a decline of 12 per cent when compared with the quantum
of investment in the previous year fiscal year 2019,” Vestian said in the
report.
During the fourth quarter of the last fiscal, institutional investment in
real estate dropped 44 per cent to USD 727 million compared with the same
period of the previous financial year.
The financial year 2019-20 observed the lowest quantum of investment in
five years, it said.
The consultant attributed this decline “largely to the tight economic
situation during the year and the uncertainty brought forth by the COVID-19
crisis in the last quarter of the year”.
The commercial assets accounted for 81 per cent share (USD 3,636 million)
of the total investment in fiscal year 2020, followed by the residential
segment with 13 per cent share (USD 565 million).
Across geographies, Mumbai, Bengaluru and Pune cumulatively accounted for
nearly 90 per cent of the total investment in real estate in fiscal year 2020.
Mumbai led with 42 per cent share, followed by Bengaluru with 37 per cent
share.
Majority of the investment in fiscal year 2020 was led by investors from
the US, Singapore, Hong Kong and Japan. The US-based institutional investors
accounted for 67 per cent share of the total investment, the report said.
On the possible impact of the COVID-19 crisis on the Indian real estate,
the consultant said the commercial segment would remain subdued for the next
2-3 quarters while the residential segment could take a longer period of time
to revive.
“With a number of risk factors arising in the real estate industry such as
extended timelines of construction/project completions due to lack of labour
availability, impact on sales and the long wait for approvals, PE and other
institutional funds would be cautious in choosing the developers and projects
for funding,” the report said. US-based PE firms, that have led investments in
Indian real estate in the past five years, may tighten their purse strings
amid the COVID-19 outbreak, it added.
With increased risk in the sector, the funds that were available at 15 -17
per cent are expected to cost 18-20 per cent depending on the project
attributes.
Vestian, which has a presence in the Indian market, said that investors
would target over 20 per cent return on their investments.
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