Tuesday, 6 December 2016

JLL chief bats for pension, insurance funds in realty

Asia's third largest economy is poised to list InvITs and REITs on the local bourses in a bid to attract more global capital and improve liquidity for the two sectors.




BENGALURU: India should consider allowing domestic pension and insurance money into rent-yielding commercial real estate and infrastructure, Jones Lang LaSalle (JLL) president and CEO Colin Dyer said. This could provide a fillip to FDI in real estate, which is on course to more than double this year, the global head of US-based real estate services and investment management firm said.

Asia's third largest economy is poised to list infrastructure investment trusts (InvITs) and real estate investment trusts (REITs) on the local bourses in a bid to attract more global capital and improve liquidity for the two sectors.

Some of the foreign pension and insurance assets managers have wondered why their domestic counterparts are restricted from buying into instruments that behave like mutual funds, but are inflation-indexed.

JLL chief said he could understand the reasons for not allowing domestic pension or insurance money until now. There was a certain lack of regulations which made these investments risky. But it's probably time to revisit this along with all the new regulations, improving standards and professionalism, Dyer told TOI during a visit to the country last week.

"We welcome any move to change the government laws (to facilitate investments of Indian pension and insurance money). Typically, international pension funds and insurers invest about 5-10% of their total assets in income generating real estate portfolios," he added.

Infrastructure Leasing and Financial Services (IL&FS) is in the final preparations to list some income generating assets as the country's first InvIT to raise $750 million. Similarly, Blackstone Group, the most prolific foreign investor in rent-yielding space market, has been studying the possibility of listing an Indian REIT.

Indian government is seriously considering a move to relax rules permitting pension and insurance money to be invested in InvITs and REITs, sources familiar with the matter said recently.

FDI into Indian real estate stood at $3 billion last year but the number is expected to touch $7 billion this calendar since the overall investor confidence has improved due to the efforts undertaken by the Narendra Modi government, Dyer said.

This includes having a code for Goods and Services Tax (GST) finally; the government's commitment to tackle corruption and the introduction of stringent laws such as the RERA (Real Estate Regulatory Act) Bill which will help operate the sector more professionally.
Moreover, the quality of products built has improved over the years which is up to international standards, that adds to the attractiveness, he explained.

JLL remains optimistic about the tenanted office space sector which continues to generate stable yields for investors. "With the regulations being cleared out and India having a potential for listing REITs worth about $18 billion, we expect to significant attraction levels," Dyer said. "We plan to bring our international funds to invest in Indian commercial real estate in the near future," he said.

The residential real estate will remain slow for another three to four quarters at least due to the drop in sales velocity, after which an uptick is expected, he added.