The country’s affordable housing and logistics sectors could be potential investment targets for sovereign wealth funds (SWFs), on the back of tax exemptions announced in the Union Budget 2020 early this month.
The Budget granted 100% tax exemption on interest, dividend and capital gains income to SWFs investing in infrastructure. As both the affordable housing and the logistics sectors have been accorded infrastructure status, a research note by property consultancy firm JLL states that the Budget exemptions would “boost investments” into both these sectors.
SWFs are state-owned investment funds commonly established with revenues generated from trade surpluses, central bank reserves, currency operations, privatisations, and transfer payments.
“SWFs have been playing a pivotal role in investments globally with estimated AUM (assets under management) of $ 8.1 trillion as of 2019. The Union Budget for 2020-21 has further incentivised SWFs to invest in infrastructure, including affordable housing and warehousing by providing tax exemptions,” says Ramesh Nair, CEO and country head, JLL India. “The rise in potential returns is expected to drive more SWF investments in India. SWFs would be more inclined to use the direct investment route as compared to investment platforms.”
SWFs have assets under custody (AUC) of $29 billion as of December 2019 in India. Of these, real estate and warehousing account for 22%, amounting to $6.6 billion. “SWF investments quadrupled to $5.3 billion during 2014-19 from $1.3 billion between 2005 and 2013, due to various reforms introduced in the real estate sector. Going forward we expect more traction from this type of patient capital,” says Samantak Das, chief economist and ED, JLL India.