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India’s outbound capital increases by 92% in 12 months to Q1 2019: Knight Frank Report

17 June 2019

Knight Frank, the independent global property consultancy, today launches the 2019 edition of its flagship report, Active Capital. According to the report, India’s outbound capital into commercial real estate increased by 92% to US$0.7bn in 12 months to Q1 2019. United Kingdom, Netherlands, Germany, United States of America and Australia were the top destination countries of Indian capital investments. Inbound cross border investment volumes into Indian commercial real estate accounted to US$2.6bn in 12 months to Q1 2019.

Knight Frank’s Active Capital 2019 report delves into the sources and destinations of cross-border investments in commercial real estate and highlights five themes shaping the next phase of global real estate investment: late cycle investing, capital gravity, the reinvention of capital, ‘nownership’ and the value of data.

Asia-Pacific outbound capital

Between Q1 2018 and Q1 2019, total outbound capital from Asia Pacific dropped 34% (from US$88bn to US$57bn), coming in third behind North America (US$110bn) and Europe (US$104bn), due in part to the significant fall in outbound capital from China and became net importer of capital.

In the same period, Singapore overtook Hong Kong, recording a 23% increase in outbound capital. According to the report, Singapore has already invested more than US$4 billion into China, South Korea, the UK and Australia in Q1 2019, reflecting several landmark cross-border deals.

Top 5 global destinations of India’s outbound cross border investments into commercial real estate:

Source Country

Global Destination

Investment Volumes                  (12-months to Q1 2019)

       India

United Kingdom

$328,785,177

Netherlands

$132,434,671

Germany

$116,137,513

United States of America

$71,076,989

Australia

$67,630,260

Source: Knight Frank/RCA

Top capital exporting countries globally (Figures in US$)

#

Source country

12-months to Q1 2018

12-months to Q1 2019

1

United States of America

                      61,021,268,985

                    59,628,414,693

2

Canada

                      23,348,695,211

                    50,407,714,161

3

Germany

                      19,892,706,157

                    24,494,043,903

4

Singapore

                      17,706,485,351

                    21,856,679,460

5

United Kingdom

                      14,101,204,634

                    18,534,994,383

6

France

                      12,609,470,691

                    18,187,000,601

7

Hong Kong

                      18,237,800,416

                    11,452,839,115

8

Switzerland

                        6,774,522,298

                    11,214,040,082

9

South Korea

                        8,784,839,873

                      8,926,651,311

10

China

                      34,589,536,143

                      5,782,042,060

30

India

                          373,082,757

 

                          716,064,610

 

Source: Knight Frank/RCA

Neil Brookes, Asia-Pacific Head of Capital Markets, Knight Frank, said, In the past 12 months, outbound capital from Asia-Pacific, and Singapore in particular, has sought out alternative asset classes in Western markets while reducing their exposure to retail assets in the region, previously thought of as a core asset class.”

Shishir Baijal, Chairman & Managing Director, Knight Frank India, said, “With geopolitical factors coming into play, prolonged global economic cycle and interest rate in late cycle investment is prompting cross-border capital flows. The Indian investors are increasingly looking at international commercial real estate assets to diversify risk and increase their returns.”

Asia-Pacific inbound capital

With investment volumes of US$704,143,457, Singapore was the biggest capital source country for the Indian commercial real estate between Q1 2018 and Q1 2019, followed by Australia (investment volume – US$ 98,647,399) and Japan (investment volume – US$25,356,029).

India ranks 20th in the aspect of top capital importing countries, globally.

Top 5 global source countries of cross border investments into India’s commercial real estate:

Source Country

Destination Country

Investment Volumes                  (12-months to Q1 2019)

Singapore

India

 

$704,143,457

Australia

$98,647,399

Japan

 

$25,356,029

 

China

$21,138,726

 

Hong Kong

$11,108,963

Source: Knight Frank/RCA

Between Q1 2018 and Q1 2019, China was a net importer of capital and Asia Pacific’s largest recipient of cross-border capital, edging ahead of Australia. South Korea was the only other Asian entrant in the top 10 destinations globally for cross-border investment.

Top capital importing countries globally (Figures in US$)

#

Destination Country

12-months to Q1 2018

12-months to Q1 2019

1

United States of America

                      54,157,903,628

             80,882,031,454

2

United Kingdom

                      41,549,085,817

             34,851,878,141

3

Germany

                      33,591,633,316

             24,369,581,105

4

France

                      11,404,812,756

             18,229,163,913

5

Spain

                      14,969,095,823

             16,317,263,062

6

China

                        9,134,327,834

             14,294,951,229

7

Australia

                      11,172,278,439

             13,126,630,875

8

Netherlands

                      13,941,398,883

             12,696,783,194

9

Poland

                        6,270,069,668

                5,831,363,083

10

South Korea

                        2,323,960,448

                5,729,007,207

20

India

                        3,923,417,354

 

                2,586,188,946

 

Source: Knight Frank/RCA

Into extra time
The report discusses the implications for real estate investors in the late cycle environment, arguing that many markets will not see returns hit recent highs.

“With ongoing trade tensions and heightened economic uncertainties, many Asia-Pacific central banks have opted for a more dovish stance on their monetary policies as economies start decelerating. In the past six months alone, five Asia-Pacific central banks have cut their benchmark interest rates following weaker than expected Q1 2019 GDP growth,” said Nicholas Holt, Asia-Pacific Head of Research, Knight Frank.

“While this will support real estate pricing, given the stage in the cycle, investors searching for higher returns are increasingly pivoting towards alternative assets and fringe markets,” Holt added.