Opportunities in real estate funds

investors’ Interest is moving away from traditional real estate investments to the real estate funds, which provide a more diversified way to invest. The real estate funds lend to real estate companies at a fixed coupon rate.

At the CafeAlt Conference 2024, Amit Bhagat, CEO and MD, ASK Property Fund shares with us opportunities in real estate funds.

Residential real estate dynamics

The inventory overhang in real estate refers to unsold properties that are under construction, measured by dividing the total by the average sales of the last four quarters. After COVID, as the supply of new properties dropped, demand increased, resulting in more properties being sold than added.

This has reduced the average time to sell under-construction inventory in India’s top seven cities from 30 months to around 10 months, especially in multi-story buildings. The rapid increase in new home purchases is also linked to rising property prices. It’s important to buy at the right time to take advantage of property valuations.

Office real estate

The office real estate market is facing some difficulties, especially with Grade B and Grade C office spaces. More offices are becoming vacant and demand for them is low because the amount of space being rented is equal to or less than what’s available.

This is happening due to factors like the rise of cloud technology, the lasting effects of COVID-19 and more people working from home. However, there is growing interest in Grade A offices, as companies prefer higher-quality spaces.

Retail real estate

The situation in retail real estate is quite different. Shopping malls and retail spaces went through a tough time but have now recovered well. Currently, more retail space is being rented than available. This is why the first retail real estate investment in India is doing better than office real estate investments.

Institutional investment in India

Institutional investments in India’s real estate are mainly going into areas like office spaces, logistics, and industrial warehouses. Even though there is money coming in, past problems with developers who didn’t deliver as promised have made investors hesitant to put money into the residential sector.

Overall, Amit believes that real estate funds work well during countercyclical opportunity and these funds are linked to interest rates cycle. He said that the mortgage to GDP ratio in India is just 11% compared to 60% in US and 90% in Australia, reflecting ample opportunities for investors in India.

Click here to see the complete video on Cafemutual YouTube channel.

Like what you are reading?