India | Jan 2021

Research Report

Capital Markets
Update: Q4 2020
 Opportunistic bulk deals drive USD 5 billion investments in 2020

Strong economic recovery, an expectation of low-interest environment and improved asset income visibility to drive
investments in 2021.

Institutional investment1 in Indian real estate staged a smart recovery during Q4 2020 with USD 3.5 billion investments. As a
result, 2020 closed with USD 5 billion investments, equivalent to 93% of 2019 transactions (USD 5.4 billion), despite a sudden
halt brought on by the pandemic. The 2020 comeback holds significance when seen against the pace and percentage of the
recovery from the last global financial crisis (GFC). Not only did the post-GFC recovery phase take more than three years, but
the drop in 2009 was more than that witnessed in 2020 (see Fig. 1). Over the years, investments have moved in tandem with
reforms and maturity in the real estate sector. Moreover, various structural reforms during the last decade have brought much-
needed transparency and accountability to the sector.

Figure I A sharp recovery in institutional investments in 2020 over the previous global crisis

8.4
Pandemic period
USD bn recovery

6.0 5.8
Post-GFC recovery 5.4
4.8 5.0
4.4
4.1
3.3

2.1 2.3
1.7 1.9
1.0 1.2

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
No. of
46 106 59 37 81 89 54 40 50 82 133 62 52 54 27
deals
Source: JLL Research Jan-Mar Apr-Jun July-Sep Oct-Dec

A deeper analysis of institutional investments in 2020 indicates that the recovery has been narrow-based, as 27 deals were
transacted in 2020 over 54 in 2019. The two large portfolio deals with an estimated value of USD 3.2 billion accounted for 65%
of the total investments in 2020. These investments by large global funds in times of uncertainty indicate the availability of
quality assets at attractive valuations.
1
Institutional flow of funds includes investments by family offices, foreign corporate groups, foreign banks, proprietary books, pension funds, private
equity, real estate fund-cum-developers, foreign funded NBFCs and sovereign wealth funds. It also includes anchor investors in REITs.

Capital Markets Update Q4 2020 2

 Large portfolio deals validate the investment potential of Indian real estate

The pandemic led to pull back in investments due to uncertainty over income stability and return to normalcy. However,
large global funds took this opportunity to negotiate portfolio deals with developers who offered quality rent yielding assets
in cities with a higher presence of global technology players as well as global in-house centres. The Blackstone Group took
over 21 million sq ft of completed and under construction office, retail and hospitality assets from Prestige Estate Ltd. for
around USD 1.2 billion.

Similarly, the Brookfield Group entered into an agreement with RMZ Developers to acquire around 12.5 million sq ft of
office and co-working assets for around USD 2 billion. Office assets account for a major share of investments in both these
transactions, indicating the strength of the asset class. India’s Grade-A office stock of 629 million sq ft as of Q4 2020, with
sub-5% vacancy levels in Bengaluru, Hyderabad, Chennai and Pune as well as in prime sub-markets of Mumbai, Delhi NCR
and Kolkata, make the asset class ideal for investments.

Office assets dominate portfolio deals

Table I Proposed asset transactions by Prestige Estate Projects Ltd.

Type Stage Number of projects Location

Office Ready 6 Bengaluru, Chennai and Gandhinagar

Office Under construction 4 Bengaluru and Kochi
Retail Ready 9 Bengaluru, Chennai, Hyderabad, Mangalore, Mysore, Udaipur
Hospitality Ready 2 Bengaluru
Source: Company filing with Bombay Stock Exchange

Capital Markets Update Q4 2020 3

 Office assets account for a major share of investments in 2020

The two major deals in 2020 indicate that office assets account for a major share of the portfolio apart from retail and hospitality
assets. The comparison of deals in 2020 with that in the previous year indicates that office assets continued to attract the highest
share of investments. Though direct investments in warehousing were not reported, dedicated platform funds and developers
were reported to be investing in the construction of warehouses to meet the growing demand from the e-commerce industry.

Table II Asset wise investments

Asset Grand
class Total
Residential Office Retail Hospitality Portfolio Warehousing
deal*

2019 1,074 2,876 583 567 - 331 5,431

2020 460 3,102 - 130 1,248 94 5,034

*Portfolio deal (office, retail & hospitality)
Source: JLL Research

India’s office sector has witnessed continuous growth over the last four years with the average annual net absorption crossing
30 million sq ft, leading to steady rentals and capital appreciation till the onset of the pandemic. Global investors, looking for
stable yields and regular returns, believe that technology sector driven office demand is expected to grow further and keep
office absorption robust. To add to it, the success of two listed REITs has provided a new route for investments.

India
Capital
officeMarkets
market Update
update Q3
Q4 2020 4
 Bengaluru attracts maximum
investments in 2020
Bengaluru, with 150 million sq ft of Grade-A office stock, has the largest
share (23%) of India’s total office stock among its top seven cities. India’s
Silicon City is home to major global as well as domestic technology
players, technology start-ups and global in-house centres of multi-
national companies. The two large transactions accounted for most of
the city’s office assets, leading to a 74% share of investments in 2020.

Figure II Bengaluru leads with 74% share of investments

Bengaluru
74% Delhi NCR
Chennai
MMR

6% Hyderabad

6% Pune
5 %
6%1 2%
% Others

Source: JLL Research

Capital Markets Update Q4 2020 5

 Strong economic recovery to boost investment climate

The year 2021 has started on a positive note with hopes of return to normalcy over the next few quarters. During the July-
September 2020 period, the Indian economy recovered at a better-than-expected pace, as the phased lockdown relaxation
measures helped to resume economic activity. There were signs of further growth during the festive season of October–
December 2020 as indicated by various macro-economic indicators. The Indian economy is hence expected to bounce back
and grow by 8.8% during the calendar year 2021.

Figure II GDP growth in 2021 to be one of the highest in the decade

8.8

5.8
4.9

2019 2020E 2021F 2022F

-7.4
*Note: GDP forecast is for the calendar year
Source: Oxford Economics

The backdrop of economic recovery and return to normalcy is

expected to bring visibility to the income stability of rent yielding
assets, which will help in asset pricing. Investors are likely to get
more decisive and deploy the dry powder aggressively.

India’s real estate sector is expected to see the following trends:

1. Investment outlook to remain optimistic over the year as

expectations of continued low-interest rates, huge amounts of
dry powder and chase for yield drive transaction volumes

2. Investments to gain momentum during the second half of 2021

as investors increase their exposures

3. Listing of forthcoming REITs to drive investment volumes in 2021

4. Sustainable core office assets to be favoured by investors as they

align with occupier demand and provide income stability

5. Logistics and data centres to attract new set of investors

6. Platform deals in the logistics sector likely to remain active as the

segment benefitted from growing e-commerce demand as well
as pandemic induced demand for cold storage facilities from
pharma sector

7. Recovery in the residential segment and changes in FDI

regulation could ignite investment appetite for mid and
affordable housing projects

Capital Markets Update Q4 2020 6

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Capital Markets Update Q4 2020 7
AMBITION
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Find your fit, fast and easy.

Capital Markets Update Q4 2020 8

About JLL
JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. JLL shapes the
future of real estate for a better world by using the most advanced technology to create rewarding opportunities, amazing spaces
and sustainable real estate solutions for our clients, our people and our communities. JLL is a Fortune 500 company with annual
revenue of $18.0 billion in 2019, operations in over 80 countries and a global workforce of nearly 93,000 as of June 30, 2020. JLL is the
brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit jll.com

About JLL India

JLL is India’s premier and largest professional services firm specialising in real estate. With an unaudited revenue in excess of 4,900
crores for FY 2019-20, the Firm is growing from strength to strength in India for the past two decades. JLL India has an extensive
presence across 10 major cities (Mumbai, Delhi NCR, Bengaluru, Pune, Chennai, Hyderabad, Kolkata, Ahmedabad, Kochi and
Coimbatore) and over 130 tier II & III markets with a cumulative strength of close to 12,000 professionals.

The Firm provides investors, developers, local corporates and multinational companies with a comprehensive range of services. This
includes leasing, capital markets, research & advisory, transaction management, project development, facility management and
property & asset management. These services cover various asset classes such as commercial, industrial, warehouse and logistics,
data centres, residential, retail, hospitality, healthcare, senior living, and education. For further information, please visit jll.co.in

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Capital Markets Update Q4 2020 9

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