PE investments in Indian realty may go up by 11% to $6.9b in 2022

V Nagarajan

With improved economic outlook and evaluation of the influence of the variables on investments, total private equity (PE) investments in India may rise by 11 per cent year-on-year (YoY) to $6.9 billion in 2022, according to a survey by Knight Frank Research.

India’s investment environment recovered in 2021 as global investors who had shied away owing to the uncertainties around growth opportunities during the pandemic returned, bolstered by successful vaccination campaigns and the government’s fiscal and monetary policy assistance.

Despite the impact of a severe second wave, private equity investments in the Indian real estate industry surged by 57 per cent Year on Year (YoY) in 2021.

The Indian real estate industry received a total of $6.2 billion in investments across four segments: office, residential, warehouse and retail.

The office segment remained the most popular investment choice on the back of the resilience exhibited by investible grade office assets, while the residential sector observed an upcycle fuelled by positive consumer sentiments on home ownership and a better prepared developer eco-system.

Strong occupier demand and scope to develop new Grade A warehouse spaces, boosted investments in the warehouse and industrial segments; and the retail industry – which was at the epicentre of the pandemic, observed a surge in investments as investor interest for stable retail assets grew, allowing the retail business to recover. In the first quarter of 2022, the effect of Omicron, concerns of rate increase and rising global tensions caused by the ongoing conflict, hampered investment flow.

The Indian real estate received total investments of $1.2 billion in the first quarter of 2022, compared to $3.7 billion received in 2021. However, with the majority of events factored in, 2022 is predicted to be a solid year for investment, with investments expected to return to prepandemic levels.

The office category is expected to attract most of the investment, owing to the positive return to office post pandemic experience.

An improving office space demand scenario, coupled with a balanced supply environment will have a positive impact on occupancy and support rent growth.

While interest rate level in the economy has started to move up, limited availability of investible grade assets will protect large expansion of capitalisation rate which hovers between 7.5-8.0 per cent. Warehousing will continue to attract investments owing to India’s renewed focus on ‘Make in India’ programme and burgeoning e-commerce eco-system.

The residential sector which has now moved into an upcycle fuelled by positive consumer sentiments around home ownership and a better prepared developer eco-system, will be an appealing investment choice in 2022, with enhanced risk acceptance by stakeholders as reflected in the increase in equity participation. India’s retail sector will continue to witness investment interest led by a rebound of consumption demand in brick-and-mortar formats.

Overall, investor confidence has risen in India post pandemic, owing to improved economic performance and expansion in the office, residential, industrial, and retail sectors.

PE investments in India have been found to be largely correlated to government investment, currency movement, inflation, interest rate, and office supply in recent years.

As a result of the improving economic outlook and our evaluation of the influence of the variables on investments, we project total private equity investments in India to rise by 11 per cent YoY to $6.9 billion in 2022. While there are uncertainties around COVID-19 and the rate at which interest rates are hiked, these concerns have been largely discounted, posing minimum threat to the investment climate.

I invested in apartment a few years ago partly utilising home loan from a bank in India. Now I want to sell the property and repatriate the funds to Gulf. As it was rupee loan, can I repatriate the sale proceeds? Please clarify. Diwakar, Sharjah

Yes. You can repatriate the sale proceeds of immovable property out of funds raised through bank loan to the extent that such loans are repaid out of foreign inward remittance. This can be either through inward remittance through normal banking channel or by debit to your NRE account. Authorised foreign exchange dealer banks will allow repatriation of sale proceeds on certification that local taxes, if any due, have been duly paid for.

I have an apartment in Hyderabad and inherited commercial property from the family. Will it affect my right due to marital status? Ranjini, Dubai.

According to the Hindu Succession (Amendment) Act 2005, you have the same rights as a son to your father’s self-acquired property and assets, irrespective of your marital status, unless specified otherwise by your father in his will.