
Embassy Group’s Jitu Virwani has backing from Blackstone for the launch of India’s first REIT
Institutional investment into India’s real estate sector is estimated to have reached its highest annual level in ten years in 2018, driven by a mix of steady economic growth and ongoing policy changes, according to a report by property consultancy JLL released late last month.
The country’s property sector Indian real estate is estimated to have attracted about $5.5 billion from institutional investors last year, up from a little over $1 billion in 2009, the report titled Institutional Flow of Funds into Indian Real Estate – Trends and Progress indicated.
The property sector attracted $30 billion in institutional investment between 2009 and 2018, with a bulk of the investment coming through in the past five years, the JLL report noted. While the period between 2009 and 2013 saw investment totalling around $10 billion, investment between 2014 and 2018 is estimated to have doubled to $20 billion, encouraged by a host of regulatory reforms.
Commercial office space emerged as the preferred option for institutional investors, accounting for around 40 percent of their cumulative investment between 2014 and 2018 – a trend that is likely to persist, according to the report. There is also increasing interest among institution in backing investment platforms, as investors seek more active roles in the investment process.
Institutional Investments Grow Over Time
Institutional investor sentiment in recent years has been buoyed by several reforms such as the Securities and Exchange Board of India’s guidelines for Real Estate Investment Trusts (2014), Housing for All Mission (2015), Real Estate Regulation and Development Act (2016), Benami Transactions (Prohibition) Amended Act (2016) and relaxation in Foreign Direct Investment procedures.
Nevertheless, while investor interest has grown since 2009, the pace has been far from steady. The total money invested into the sector by institutions during 2018 is estimated to be just 1.4 percent higher than the previous year – a significant tapering from the 24 percent growth seen in 2017. In 2016, investments fell 3.5 percent, while they jumped 46 percent in 2015 from the previous year, according to the report.
Also, despite regulations that paved the way for introducing real estate investment trusts, investors still await the launch of the country’s first listed REIT.
Media reports say the long-awaited investment vehicles could finally reach the market in 2019, after the $709 million Blackstone-backed Embassy Office Parks REIT received approval from the Securities and Exchange Board of India (SEBI) during the last week of December. The REIT is likely to hold its IPO launch the REIT in March, said a person aware of the development.
Institutions Pursue Office Opportunities
During the recent upswing in investment, office asset have been the favoured target for institutions, with capital flows into India’s office market increasing from $1.6 billion from 2009 to 2013, up to a total of $8.2 billion between 2014 and 2018.
“Constructive modifications also brought REITs [real estate investment trusts] closer to reality, laying the foundation for global capital flow into office spaces in India,” the report noted. “As a result, global investors like Blackstone, Brookfield and sovereign wealth funds like GIC Singapore picked up large office assets for building their REIT portfolios in India.”
Platform Investments Gain Favour
In adapting to India’s lower capital values and geographic scale, the report found that institutions have increasingly favoured platform deals, with various players backing initiatives in affordable housing, shopping centres, industrial and warehouse assets to build tradeable portfolios.

Warburg Pincus-backed ESR recently launched a new $1B logistics JV in India
Institutional investments in real estate platforms surged from $250 million in 2012 to $2 billion by 2018, the report noted.
Among these platforms, nearly one-third (32 percent) of the investment went into grade-A office projects. The warehousing and industrial segment accounted for another 24 percent of the funds invested through these platforms, which typically involve an institution teaming with a blue-chip developer, as investors bet on changes ushered in by a new goods and services tax and robust growth in e-commerce.
Appetite for such platforms remains robust: In November, ESR Group, an Asian logistics real estate developer backed by private equity firm Warburg Pincus, and Germany’s Allianz announced they will set up a $1 billion investment platform to invest in India’s logistics sector.
Previously, in May 2017, Canada Pension Plan Investment Board (CPPIB), one of Canada’s largest pension funds, and warehouse developer Indospace also formed a joint venture – ‘Indospace Core’ –with an initial commitment to invest $500 million to acquire and develop modern logistics facilities.
Meanwhile, institutional investment in the residential segment has been declining and is likely to continue falling, the report said.
International Funds Take a Leading Role
Among the institutions venturing into Indian real estate deals, private equity firms accounted for more than 80 percent of the capital commitments to the sector.
Foreign funds and sovereign wealth funds accounted for 45 percent of the total private equity investment in the country’s property markets to date, according to JLL’s findings, and among those commitments, the percentage originating from sovereign wealth funds rose from five percent between 2009 and 2013 to 15 percent between 2014 and 2018.
“This improved confidence was mainly driven by introduction of REIT regulations, improved transparency and accountability in the real estate sector,” the report said, noting that sovereign funds are acting as anchor investors in platform funds as well as entering into joint ventures with pedigree developers.
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