February 2, 2022

Institutional investors have started to invest more money in residential real estate


Institutional investors have started to invest more money in residential real estate because of better sales momentum in this part of the market.

In addition, institutional investors are taking recovery into account when they put their money into the right projects and places.

Since the Real Estate (Regulation and Development) Act, 2016, there has been a rise in the level of transparency in residential real estate. This is giving institutional investors more confidence as they increase their exposure to this market.

“We have seen a lot of consolidation in this space over the past few years, and there is a growing sentiment that the sector has largely been cleaned up. This, coupled with the strong residential demand that we are witnessing, has brought a lot of investors back into the market,” said Lata Pillai, managing director and head, Capital Markets, India, JLL.

“Robust hiring in the past 18 months and increasing salaries in technology, healthcare, and other sectors is likely to keep the momentum going for housing sales and institutional investors’ interest in the sector.”

According to her, one of the distinguishing features of the investments in 2021 has been the comeback of the residential sector, which has seen the second-highest share of total investments in Indian real estate.

In 2021, the residential sector got 2.3 times more money than it did in 2020. That’s $1.08 billion, compared to $460 million in 2020.

Realty developers are also showing a willingness to invest in land and even undertake joint developments in the backdrop of the increase in demand for residential properties.

“We are witnessing the same activity seen in 2014-2015 in terms of investment in land backed by funds. Until last year, it was through the acquisition of incomplete projects, and now it is through development management agreements. Institutional funds are expecting residential demand to remain buoyant for the next four years as the housing cycle usually lasts 5-7 years,” said Gorakh Jhunjhunwala, managing director, Meraqi Advisors.

The transactions concluded in the last few quarters also indicate the continuation of investment momentum for the housing segment.

Recently, Brookfield Asset Management invested over ₹1,000 crore in Hyderabad-based realty developer INDIS’ five under-construction residential projects to grow its housing project portfolio in the mid-market segment in South India’s urban locations.

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