Affordable housing, logistics to attract SWF investment after budget proposals: JLL

The recent measures announced in the Union Budget granting tax exemption on interest, dividend and capital gains to sovereign wealth funds investing in infrastructure will further boost investments in affordable housing and logistics, says JLL Research.

Sovereign wealth funds (SWF) are state-owned investment funds commonly established with revenues generated from trade surpluses, central bank reserves, currency operations, privatisation and transfer payments.

According to the property consultant, sovereign funds hold USD 29 billion of assets under custody (AUC) as of December 2019 in the country, of which, real estate and warehousing account for 22 per cent, amounting to USD 6.6 billion.

"These funds have been playing a pivotal role in investments globally with estimated AUM of USD 8.1 trillion as of 2019. Investments by SWF in India improved sharply as a result of various policy measures introduced to attract foreign investments," JLL India CEO and Country Head Ramesh Nair said.

He said that the Union Budget for 2020-21 has further incentivised SWFs to invest in infrastructure including affordable housing and warehousing by providing tax exemptions.

Between 2008-18, global AUM of sovereign funds grew at a CAGR of 10 per cent with Asia garnering the highest share of nearly 42 per cent.

"The rise in potential returns is expected to drive more SWF investments in India. SWF would be more inclined to use the direct investment route as compared to investment platforms," Nair added.

According to the consultant, the investment strategy of SWFs is expected to change after the announcement of exemption.

"An increasing trend of SWFs investing through investment platforms/joint ventures with credible developers and funds was being observed in the past few years. A commitment of USD 2 billion through various platforms or joint ventures was made between 2014-19. Now, SWFs would be more inclined to use the direct investment route as compared to investment platforms," Nair added.