The mega real estate deals that hogged the limelight in 2017 are expected to witness an upward movement in 2018, both in Asia Pacific and India. The volume of transactions in the Asia Pacific region are likely to grow by 5% to reach $135-140 billion in 2018, driven by continued momentum in core markets and increased interest in developing markets, as per a study by JLL.
India, a key market in the region, is expected to benefit from reforms such as demonetisation, the implementation of Real Estate (Regulation and Development) Act and Goods & Services Tax.
The spate of policy changes in the last two years has made the market more transparent. Going forward, technology disruptions and alternative real estate segment will attract more investments into the market.
“India’s Tier 1 office and retail sectors are projected to show the highest total returns in 2018. We’ve seen the end of the short-term disruption in India resulting from reforms such as demonetisation and the implementation of Goods & Services Tax. 2018 may be the year for investors to consider a strategic entry into India, given its positive long-term fundamentals and economic growth,” said Ramesh Nair, CEO & Country Head, JLL India.
Last year, in the biggest foreign direct investment deal ever in India’s real estate space, Singapore sovereign wealth fund GIC struck a deal to acquire a 33.34% stake in developer DLF’s rental arm DLF Cyber City Developers (DCCDL) for $1.39 billion, or Rs 8,900 cr. In addition to this, more funds are eyeing investment and alliance opportunities in the backdrop of recent reforms.
In October, global insurance and asset management major, Allianz Group, in its maiden property-related engagement in India, partnered with Shapoorji Pallonji Group to create an investment platform for office properties. The fund is aiming to raise $500 million in equity and is also open to greenfield investment opportunities in commercial and logistics segment. This deal forms part of Allianz’s strategy to allocate about 5% of its global real estate portfolio to the Asia-Pacific region.
This year the investors are likely to seek opportunities in the alternative real estate sector such as aged care/senior housing, student housing, education, data centres, and self-storage facilities, to diversify their portfolios, and for long-term growth.
“We’re observing growing interest and a huge opportunity for alternatives real estate. Demand in these sectors clearly outweighs supply, and the demographic demand drivers in the region are growing quickly. Yields on self-storage facilities are attractive compared to other traditional asset classes, ranging from five to seven per cent in Tokyo and Singapore, five to eight per cent for Australia, and around eight percent in China and India,” Nair added.