Gurugram, 20 April 2020 – In Q1 2020, private equity real estate investment in India was USD222 million (INR16.4 billion), registering a drop of 62% QoQ. This decline is likely due to the slowing economy and the COVID-19 outbreak. Colliers witnessed increased investor focus on acquiring opportunistic assets in India, as per its latest report ‘Opportunistic Investment Avenues Increase: Identifying opportunistic strategies despite the slowdown’.
During 2019-Q1 2020, Colliers witnessed USD754 million (INR56 billion) of investment inflows into hospitality real estate in India, most of it involved distressed asset trade transactions. For comparison, this is nearly 8 times the hospitality sector investment volume recorded in the preceding five quarters. We believe these transactions have been supported by investors’ increasing confidence in the IBC 2016. The IBC enables investors to purchase the asset at an attractive valuation, without saddling them with lingering debt.
“The opportunity lies in logistics and data centres as well as core commercial office assets. Distressed assets, especially in the hospitality space, are also attractive. The opportunistic asset trade transactions is expected to gain pace in the next 2-3 years with the current economic slowdown”, says Sankey Prasad, Managing Director and Chairman at Colliers International India.
The current slowdown has resulted in reduced private equity inflows into the Indian real estate market. Considering the outbreak of COVID-19, we foresee slower decision‐making on the part of institutional investors in H1 2020, which could constrain capital deployment in India. However, Colliers noted emergence of trends in 2020 that may present several opportunities for investors that are likely to prove favourable in the long term.
“We recommend investors capitalize on the situation and focus on commercial office assets as India’s competitiveness remains. Further, lower interest rate regime is likely to compress cap rates over long term”, says Piyush Gupta, Managing Director, Capital Markets (India) at Colliers International.
Megha Maan, Senior Associate Director, Research added “the outbreak of COVID-19 and slower economic growth among other factors have altered the investment outlook for 2020. Hence, we have lowered our projection of private equity inflows in real estate to about USD3.5 billion in 2020 owing to slow decision-making by investors. However, the changing market situation presents opportunities in the residential segment, income-generating core commercial office assets and opportunistic assets, especially in hospitality space”.
Colliers recommends investors consider acquiring completed residential projects as well as investing equity in under-construction residential projects with Tier 1 developers.
About Colliers International Group Inc.:
Colliers International (NASDAQ, TSX: CIGI) is a leading real estate professional services and investment management company. With operations in 68 countries, our more than 15,000 enterprising professionals work collaboratively to provide expert advice and services to maximize the value of property for real estate occupiers, owners and investors. For more than 25 years, our experienced leadership, owning approximately 40% of our equity, has delivered compound annual investment returns of almost 20% for shareholders. In 2019, corporate revenues were more than $3.0 billion ($3.5 billion including affiliates), with $33 billion of assets under management in our investment management segment.
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