India’s strong IT sector makes it a key market for CapitaLand
In this interview, Jonathan Yap, President of CapitaLand Financial, discusses the company’s plans to double their assets under management in India and the various trends that are gaining popularity in the country’s real estate sector.
What are some of the specific growth areas that make India a key market for CapitaLand?
We have been in India for 25 years having pioneered the country’s first work-live-play IT park with International Tech Park in Bangalore in 1994. We see strong potential in India as it is one of the world’s largest and fastest growing economies. India’s strong growth in IT and IT-enabled sectors is one of the reasons it has been a key market for us.
We aim to grow CapitaLand’s assets under management (AUM) in India from the current S$3.3 billion (Rs 170 billion) to S$7 billion (Rs 362 billion) by 2024. To achieve the target, CapitaLand will acquire completed assets, execute our existing development pipeline and invest in new land plots.
We see potential to grow the business parks and logistics business which are core sectors for the Indian economy. Today, our business parks in India have an occupancy rate of more than 95 per cent and house over 300 tenants and 120,000 IT professionals. We intend to double our current 17.4 million sq ft of business and IT parks, industrial and logistics properties in India to about 40 million sq ft in the next five years.
With the growing trend of start-ups and increasing demand for flexible workspaces, we opened Bridge+, our first coworking platform in India in International Technology Park Bangalore’s Park Square mall in May 2019. There are plans to expand Bridge+ to other IT parks in India.
We are looking to grow our funds business in India to expand and diversify our portfolio. Our India property trust – Ascendas India Trust – and private funds remain integral to CapitaLand’s expansion, enabling us to grow our AUM and build scale along with our capital partners.
Have government reforms and policy initiatives made Indian real estate a safe bet or do roadblocks remain? What is the role you see global investors playing in India’s smart cities and related urban development plans?
CapitaLand is in India for the long term. Our integration of the Ascendas-Singbridge portfolio since July 2019 has strengthened our competitive edge globally. This includes India, one of our strategic growth markets, where we have fully integrated capabilities.
Prime Minister Narendra Modi’s administration has launched major reforms since elected in 2014. Policies such as ‘Make in India’, ‘Digital India’ and ‘Smart Cities Mission’, and pro-business initiatives such as introduction of Insolvency and Bankruptcy Code, Real Estate (Regulation and Development) Act and Goods and Services Tax, are aimed at driving growth and foreign investments, enabling ease of doing business, and eliminating roadblocks such as poor connectivity and access to electricity. Progressive modifications to India’s REIT policy have also been a step in the right direction.
The real estate industry plays a key role in urban transformation and development of smart cities, which could boost economic growth. Emerging technologies like proptech and blockchain can help to make this sector more competitive. As India continues to attract investors for expertise and capital for its Smart Cities Mission, we foresee further demand for our business parks in India. More than 80 per cent of our tenants are multinational companies engaged primarily in software development and R&D activities.
Are there particular innovations in the field of logistics and warehousing that you foresee tapping into in the Indian market?
Organised warehousing is gaining traction in the Indian market. The implementation of GST that focuses on building industrial corridors, ‘Make in India’ thrust on manufacturing, and the promise of a domestic consumption market, are some of the key demand drivers for Grade A warehousing space in India.
Modernisation of logistics operations, development of infrastructure and integration of supply chain solutions are leading to the development of international scale multi-modal logistics parks. There is also a rapid shift from small, unorganised warehousing developers to institutional players who have a competitive advantage in terms of scale, capital and development expertise.
How do you see the commercial real estate segment unfolding across the various tiers of Indian cities?
The commercial real estate segment will continue to grow in Tier 1 cities. This is driven by underlying forces such as an increasing talent pool, growing infrastructure, and India’s upward shift in the IT outsourcing value chain. The last couple of years have seen increased absorption of Grade A office space and we expect that trend to continue, with net absorption forecasted to reach a record high of more than 50 million sq ft in 2019.
Does India offer opportunities for the company’s co-living and shared accommodation model?
CapitaLand’s lodging business unit, Ascott, recently opened its first co-living property and Southeast Asia’s largest, lyf Funan Singapore. Ascott’s new co-living brand lyf is managed by millennials for millennials and is millennial-minded.
With the growing sharing economy, the co-living concept is gaining increasing acceptance in India from expatriates, millennial travellers to India and millennials who are migrating to larger cities in search of job opportunities. The co-living sector in India is expected to grow from around $12 billion in 2018 to $22 billion by 2022. We would certainly look for suitable opportunities to bring lyf to the gateway cities in India as the market evolves.