India property investments reach US$1.8b in Q1 as economy rebounds

The office sector accounted for over half of these investments.

As we enter the second year of the COVID-19 pandemic, there is a sense of cautious optimism with respect to economic recovery. According to Savills, numerous factors such as improving macroeconomic indicators, a rise in consumption, strong momentum in vaccine administration and improvements in overall business sentiment with the “Work from Anywhere” model have driven the sense of optimism. 

The quarterly GDP figures in India have confirmed that the country is technically out of recession; After two consecutive quarters of contraction, Q4/2020 clocked a marginal growth rate of 0.4%. Conversely however, Savills says a rising number of cases towards the end of the first quarter of the year and apprehensions about the magnitude of the “Second Wave”, have managed to instil a sense of caution. 

Here’s more from Savills:

In Q1/2021, the Goods and Service Tax (GST) revenue collection stood at approximately INR3.6 trillion, showing a growth of around 14 % compared to Q1/2020. Increasing tax collections clearly point towards a sustained demand revival. Increasing consumption can be attributed to a focus on long term growth prospects by both the central government and the apex banking regulator of the country. The union budget presented in February 2021 continued to provide the impetus for the V-shaped recovery and outlined a slew of measures in critical areas such as infrastructure and healthcare. The overarching theme of the budget was economic recovery through investment, self-reliance and inclusiveness. 

Real estate specific announcements, although few were targeted towards affordable housing and Real Estate Investment Trusts (REIT). Tax holidays and exemptions in affordable housing and debt financing for REITs are expected to strengthen the confidence of all stakeholders in the residential and commercial office segments. 

Disinvestment and monetisation of land assets of Public Sector Undertakings (PSU) are likely to provide relief to the housing segment which is particularly beset by a scarcity of land in premium locations. Also, central sponsorships of metro projects in key urban areas among other infrastructure initiatives, are likely to bolster the real estate potential of specific micro-markets in the relevant cities. 

Real estate private equity inflows, aided by the strong rebound in economic activity, have remained buoyant, especially in the commercial office segment. As per our estimates, approximately US$1.8 billion of real estate specific investments were finalised in the first quarter of 2021. Of these, office investments constituted more than 50% of the segment allocation. A third successful office REIT listing, Brookfi eld India Real Estate Trust REIT, occurred in February 2021, which was oversubscribed nearly eight times, reinforcing investor confidence in the real estate market even in such turbulent times.