Economy

FPI assets under custody increased by 103% y-o-y to ₹41,476 crore in Mar 2021: Brickwork Ratings

Anil Urs Bengaluru | Updated on June 18, 2021

Commercial real estate, which was performing well over the years, has come under tremendous stress during the pandemic, the report said

Foreign portfolio investors’ assets under custody increased year-on-year by 103 percent to ₹41,476 crore in March 2021, according to a report by Brickwork ratings which added that improving investor sentiments were reflected in declining inventories in tier-1 cities.

“There has been an active participation in the Real Estate Investment Trust (REIT) issuances, with three REITs getting listed in the last two years, and ₹13,000 crore have been raised cumulatively. It has received a good response from investors, and more such issues are expected going forward,” the ratings agency said in its report on real estate.

Commercial real estate, which was performing well over the years, has come under tremendous stress during the pandemic. “It has been witnessing high vacancies and the waiver of lease rentals, which is expected to continue till H1FY22 due to oversupply of office spaces, which is further compounded by numerous expired leases coming up for renewals,” report said.

For the ailing commercial real estate sector, the antidote is the vaccine, and the pace at which vaccine administration is accelerated. With this, demand for commercial spaces would hopefully revive, and developers are also expected to witness demand for redesigning/re-doing spaces to meet the increased hygiene- and safety-related norms in the new normal,” it pointed out.

Residential real estate

On residential real estate, Brickwork Ratings said: “The segment is facing challenges for some time now and is expected to see some traction going forward. With the extension of the work-from-home (WFH) and online education culture, there is an increased need for larger homes, especially for families with working couples. Residential project sales, which had picked up towards the end-Q2FY21, only to slow down in April and May 2021, are expected to witness recovery from the lower base recorded in H1FY21.”

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It further said “While negative sentiments led to reduced discretionary spending, resulting in the postponement of buying decisions, the need for safer and bigger homes could actually result in increased demand for residential real estate. The sector is also expected to witness increased home-buying from the end-user rather than investors. Additionally, with prolonged work-from-home for corporate employees, some reverse migration towards tier-2 and tier-3 cities is expected, which may lead to real estate demand gaining traction in these cities.”

Construction

While real estate and construction remained the most impacted sector in India in H1FY21, there was some buoyancy during H2FY21, with the economic activity reviving. Measures such as a reduction in the stamp duty in Maharashtra, lower interest rates, pent up demand and a halt in launches provided some relief to the real estate sector.

“That said, the green shoots that had started becoming visible were short-lived as the second wave of the pandemic hit the nation unawares and much harder,” the report said.

It added, “Owing to the accelerated vaccine programme adopted by the government, it is now subsiding, and hopefully the problems inflicted by the pandemic should subside soon. While Q1FY22 is expected to be a near washout for most real estate players, the pace of sales is expected to gain traction in the remaining part of FY22, with launches by various marquee players.”

According to Brickwork Ratings, while pent up demand has helped keep the sector afloat amid the pandemic, the launches lined up by real estate developers would actually offer the support required for providing momentum for revival. Consolidation is expected in the fragmented real estate space; the paucity of funds and pressure on margins is expected to impact smaller players. Additionally, demand for technology-driven, bigger homes and improved preferences is likely to improve on the expectation of the ebbing of pandemic-induced shocks, which in turn, would result in a more organised sector.

Published on June 18, 2021

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