As a substitute, rich traders are more and more choosing structured, professionally managed publicity via Alternative Investment Funds (AIFs).
In line with Karthik Athreya, Director and Head of Technique – Various Credit score at Sundaram Alternates Belongings, this marks some of the important traits within the non-public wealth panorama.
With actual property rising as the most important class for AIF investments—drawing over Rs 73,000 crore in simply the primary 9 months of FY25—HNIs are clearly embracing a better, hands-free method to accessing industrial, residential, logistics, and knowledge middle alternatives.
Athreya explains what’s driving this shift, the evolving function of household workplaces, and why AIFs—providing yields of 15–18%—have gotten the popular route for India’s rich to experience the true property wave. Edited Excerpts –
Q) No, we aren’t speaking about an residence in Dubai. However, are HNIs and UHNIs participating within the industrial actual property through the AIF route?
A) That is some of the important traits we’re seeing proper now. HNIs and UHNIs are closely leveraging the AIF path to get into industrial actual property.
In reality, actual property is the only largest class for AIF investments, attracting roughly 73,903 crores simply within the first 9 months of FY25.
These AIF investments are unfold throughout actual property segments like industrial, residential, logistics and retail. The explanations for HNI / UHNIs participation in industrial actual through AIFs are twofold.
First, the industrial market itself is booming, largely pushed by the GCC wave—India is now residence to over half the world’s Global Capability Centers. With leasing at decadal highs, there’s huge demand for high quality workplace area.Therefore as an investor, one is a daily revenue producing asset, usually round an 8% rental yield with a possibility to take part on the upside of one other 4-5% via annual appreciation / lease escalations.Second, for a busy HNI, the AIF route is solely a ‘no-brainer’. It helps them sidestep all of the complications of direct possession, like discovering tenants, managing the property, coping with day-to-day points and discovering a profitable exit technique.
As a substitute, they get a slice of a diversified, professionally managed portfolio of top-tier property with goal IRRs within the 15-18% vary.
One other route opted by HNIs is thru listed REITs, which supply the same advantages albeit decrease yield with out compromising on liquidity. There’re already almost 22,000 crores of HNI and retail capital in REITs.
Subsequently, in our opinion, HNIs are completely collaborating within the industrial actual property story in India via the AIF route.
Q) What’s driving the shift amongst HNIs from direct actual property investments to structured publicity via AIFs?
A) The shift is straightforward: HNIs wish to be strategic traders, not lively landlords. They’re selecting AIFs for entry to a diversified portfolio of top-tier offers with out the day-to-day hassles of direct possession.
That’s exactly the mannequin we have perfected at Sundaram Alternates. Our actual property methods are a testomony to this development’s success.
We’ve got persistently delivered ~15% IRRs for over seven years, which is why greater than 700 HNIs have entrusted us with over ~2,600 crores. They’re selecting a confirmed accomplice for smarter, professionally managed actual property publicity.
Q) Which actual property themes are HNIs allocating to most through AIFs — warehousing, knowledge facilities, rental-yielding industrial property, or residential growth?
A) HNIs are strategically adjusting their actual property allocations via AIFs, with the funding timeframe being an important determinant.
For traders prioritizing shorter cash-in cash-out cycles of 3-5 years, typically looking for senior secured, self-amortizing constructions with quarterly payouts—like these supplied by Sundaram—the residential theme stays a most well-liked alternative.
Conversely, these with longer funding horizons are leaning in the direction of the industrial and industrial areas. These segments provide rewards primarily via steady rental yields and annual capital appreciation, which are sometimes linked to prevailing rate of interest cycles.
A current Anarock report for FY25 exhibits Industrial & Logistics (warehousing) dominating, capturing 48% of institutional funding. This surge, although influenced by massive transactions, highlights its long-term potential pushed by e-commerce and trendy provide chains, providing steady leases and infrequently decrease growth threat.
Conversely, Workplace area is at 22% and residential at 15%. Apparently, the ‘Others’ class, encompassing themes like knowledge facilities, has jumped fivefold to fifteen%. This alerts aggressive allocation into these high-growth, rising sectors.
Knowledge facilities, whereas requiring longer horizons and specialised experience, promise important long-term appreciation and resilient revenue attributable to digital demand.
Finally, HNI allocation displays a steadiness: shorter-term alternatives in conventional residential property versus the compelling risk-return advantages and secular tailwinds of economic, warehousing and knowledge facilities for longer-term development.
Q) How do you see household workplaces and personal wealth desks evolving their actual property methods over the subsequent 2–3 years?
A) Household workplaces and personal wealth are certainly evolving their actual property methods considerably. We’re observing a transparent shift from the beforehand unregulated fairness fashions to extra structured financing, a development accelerated by the growing maturity of the Indian actual property finance panorama over the past decade.
The substantial inflows into Various Funding Funds (AIFs), notably inside the debt sector, underscore this maturation.
Trying forward, the subsequent two to 3 years will probably see these subtle traders transitioning from purely debt-oriented platforms to embracing extra mezzanine & equity-based methods which shall intention at web returns of 18-21%.
This features a willingness to finance land acquisitions and tackle back-ended premium exposures. This strategic pivot displays a extra nuanced method to risk-reward in a regulated setting.
(Disclaimer: Suggestions, strategies, views, and opinions given by specialists are their very own. These don’t signify the views of the Financial Occasions)
