Indian Family Offices Pivot Toward Institutional Real Estate

The Institutionalisation of Indian Real Estate

The landscape of Indian real estate has undergone a profound structural shift over the last eight years, moving decisively from a collection of legacy family holdings to a sophisticated institutional asset class.

Historically, property was viewed through the lens of inheritance, often consisting of ancestral farms or fragmented residential floors acquired decades ago.

However, a suite of regulatory interventions including the Real Estate Regulatory Authority (RERA), the implementation of Goods and Services Tax (GST), and demonetisation has effectively neutralised the opaqueness and governance concerns that previously deterred professional capital.

"What's happened in the last eight years is it's moved from being a legacy asset to being actually an institutional asset," noted Jai Rupani, CIO at Dinesh Hinduja Family Offices, during an exclusive interview with Rodrigo Branchini, Managing Director APAC at the GRI Institute.

This transition is evidenced by the rising appetite among wealthy families to swap raw land - often fraught with title complexities - for "clean-cut" assets developed by top-tier firms.

Investors are now more willing to deploy significant capital into tenanted commercial buildings where title risk is mitigated and cash flows are predictable.

Yield Optimisation and the Shift Toward Credit

For many family offices, the primary real estate investment thesis has shifted toward yield-generating commercial equity and strategic credit.

Modern portfolios often target full-building ownership to maintain operational control and avoid the management complexities associated with strata-titled properties. This preference for control is supported by the development of dedicated in-house teams to oversee asset management and maintenance.

The appeal of real estate debt has also surged following significant changes to the taxation of debt mutual funds in April 2023. Previously, these funds offered attractive post-tax yields of approximately 7.5%, but the removal of tax benefits has seen those returns compress toward 5%.

Consequently, real estate credit has emerged as a viable alternative for families seeking to fill this gap, with fund managers offering a spectrum of returns ranging from 10% for construction finance up to 24% for higher-risk, pre-approval opportunities.

Diversification and the Role of Professional Advisory

As the scale of Indian private wealth expands, family offices are increasingly looking beyond their local micro-communities to achieve true portfolio diversification.

While roughly 80% of investment remains localised due to the importance of existing networks for problem-solving, larger offices managing upwards of half a billion dollars are now looking toward pan-Indian and even offshore opportunities in markets like London.

This expansion into more complex markets necessitates a shift away from "writing checks without doing the work" toward a model supported by specialised real estate advisors, lawyers, and accountants.

Sustainability is also becoming a non-negotiable component of the investment lifecycle, though the impetus is currently driven by the end-user rather than the investor, with large corporate tenants now demanding LEED Platinum certification and high-efficiency infrastructure as a prerequisite for tenancy.

As India enters a projected decade of high GDP growth powered by a young, spending population, the real estate sector remains a primary gateway for domestic and international capital seeking to capture this momentum.

Watch the exclusive interview with Jai Rupani here.