Allianz Real Estate appears increasingly committed to India, drawn to the country's improving property market fundamentals as it continues to chase growth around the Asia-Pacific region.

The German investment firm develops and executes Allianz's global real estate portfolio on behalf of 38 of the group's insurance companies and pension funds. 

Its latest venture is a closed-end office development platform with local managing partner Godrej Fund Management and Dutch pension fund manager APG. Established in 2018 with $450 million of equity split equally between them, the platform is known as Godrej BTC.
Rushabh Desai

In conversation with AsianInvestor on Tuesday, Rushabh Desai, Allianz RE's chief executive for Asia Pacific, said the business has faith in the long-term growth potential of the Indian economy. 

Which is just as well, because as a long-term investor Allianz RE is well placed to "play the real estate cycles", Desai said. 

Just as importantly, the fundamental framework for investing in Indian property is also improving, he added.

“Indian commercial real estate is rapidly getting institutionalised and the increasing capital markets liquidity and transparency adds on to the attractiveness,” Desai said. 

To illustrate that, he cited the March listing of India’s first public real estate investment trust by Blackstone-backed developer Embassy Office Parks.

He also pointed to the growing authority of the Real Estate Regulatory Authority in each Indian state and the passing of the Insolvency and Bankruptcy Code. Both were enacted in 2016 and have so far had the desired positive impact on investment conditions, according to Desai.

Data from commercial property broker CBRE shows office leasing activity in India rose by almost 40% relative to the first half of 2018, crossing 30 million square feet for the first time during the first half of 2019. 

That broadly matched the period's oncoming new office supply of some 28 million square feet, which in itself was a year-on-year rise of nearly 70%. With this addition India’s overall office stock surpassed 600 million square feet by the end of June 2019, CBRE said.

Godrej BTC is targeting the development of premium grade-A offices in tier-one cities. It has secured two developments totalling 2 million square feet, one each in Mumbai and Gurgaon, and has a pipeline of 1.3 million square feet in Bengaluru.

ATTRACTED TO GROWTH

Allianz RE's involvement in the Godrej-managed vehicle follows its Indian debut in 2017, when it established an office investment platform with local conglomerate Shapoorji Pallonji, and the formation with Hong Kong-based ESR of a logistics development venture in 2018.

Investments in India are a part of Allianz RE's strategy to allocate 50% to 60% of the Asia-Pacific exposure to fast-growing markets.

According to Desai, those markets also include China and Southeast Asia, excluding Singapore, where Allianz RE recently also made an acquisition.

"We are currently on target with about 50% of our Asia-Pacific exposure in these geographies," he said.

As of the end of June, Allianz RE had assets under management worth €67.1 billion ($75.1 billion) globally. More detailed, biannual numbers broken down for the Asia-Pacific region are not yet available.

Allianz previously said it is looking to allocate 5% to 10% of its global portfolio to the Asia-Pacific region. When AsianInvestor asked about that in April, Desai responded that Allianz RE’s regional portfolio growth was in line with its broader diversification plan.

Such moves reflect a wider trend. Other large Western asset owners are also ramping up their exposure to real assets in India, with infrastructure a major focus, against an increasingly favourable backdrop for foreign investment.

AustralianSuper and Ontario Teachers’ Pension Plan have each committed up $1 billion to the National Investment and Infrastructure Fund of India, the fund announced last week. And Ontario Municipal Employees Retirement System, another Canadian pension fund, made its first investment into Indian infrastructure earlier this year.