The city attracted $1.6 billion (about Rs 12,000 crore), about 37% of the total of $4.4 billion (about Rs 33,200 crore) invested in the country across residential, commercial and office projects.
The city witnessed a growth of 68% over the previous year’s investment of $985 million (about Rs 7,400 crore). Kotak Realty has led the pack of investors with an investment of $400 million (about Rs 3,000 crore), followed by Godrej Fund Management with $105 million (about Rs 790 crore) during the fiscal. Other major investors were GIC, HINES, and DMI Alternatives, according to data provided by Vestian Global Workspace Services Pvt Ltd.
Bengaluru along with Mumbai and Pune cumulatively accounted for nearly 90% of the total investment in real estate sector during the year.
Mumbai accounted for the largest share of 42% in the total investment in the country. Overall, nationally, the year 2019-20 witnessed the lowest quantum of investment in five years attributable largely to the tight economic situation during the year and the uncertainty brought forth by the COVID-19 crisis in the year end, Shrinivas Rao, CEO – APAC, Vestian Global said.
The majority of the investment was in commercial real estate, which also includes office and retail segments. The investment in this sector was $1.43 billion during the year.
Of the total investment made in Bengaluru, $1.4 billion (about Rs 10,500 crore) was in commercial real estate, which includes office and retail. While the residential segment witnessed $103 million, others category saw the second-highest investment of $123 million.
COVID-19 crisis: Outlook
With a number of risk factors arising in the real estate industry such as extended timelines of construction/ project completions due to lack of labour availability, impact on sales, and long wait for approvals, PE and other institutional funds would be cautious in choosing the developers and projects for funding.
US-based PE firms, that have led the investments on Indian real estate in the past five years, may tighten their purse strings amid the COVID-19 outbreak, Rao said.
With increased risk in the sector, the funds that were available at 15-17% are expected to cost 18-20% depending on the project attributes.
The overall cost of funds is projected to increase by 2-3% based purely on the risk involved, while funds will be expecting more than 20% returns from specific projects, he said.
With several companies contemplating diversification, there is likely to be an increase in investments in emerging asset classes such as warehousing & logistics, student housing and affordable housing, Rao added.
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