Stressed property assets provide institutional investors with investment opportunities.

Institutional investors have set a solid beginning by investing over $1 billion in stressed property opportunities. The strategy is expected to progress with the more establishment of the law of Insolvency and Bankruptcy Code (IBC), which came into force in 2016.

Companies with large liabilities have liquidated their real estate assets, which leads to new opportunities. Investors evaluate various options, including the purchase of non-performing assets, distress sale and entity-level stake.

The recent stressed property transaction was the sale of a $385 million debt relief IT park in Bengaluru, by the Cafe Coffee Day Enterprise. The 90-acre, IT-focused Global Village Tech Park has been acquired by Blackstone and Salarpuria Sattva Developers. Brookfield has been approved for $564 million to acquire the assets of Hotel Leela Venture, which include key hotel properties in Delhi, Bengaluru, Udaipur and Chennai.

Institutional investors’ capital commitment gives the creditors a level of comfort and results in a quicker settlement in such deals. These deals also offer investors an opportunity to optimize their returns as per the underlying risks.

However, the current scenario shows the maximum amount of stressed assets are in the residential real estate segment. India is being tossed into the residential sector with 4.54 lakh running behind their completion dates, under pressure from delayed/stalled projects. Few of them are already under bankruptcy proceedings. The project value is estimated at $66 billion.

The debacle of the NBFC and the subsequent funding shortage led to many of these ventures’ issues. The closing of a refinancing process culminated in many unfinished projects in need of finance. That, together with investors who prefer to look at ready-to-move-in properties had an effect on housing projects.

The government also announced a special finance window for stalled affordable and medium-income housing projects to ensure the delivery of homes locked in stalled housing projects. This fund is expected to be worth $3.5 billion, with commitment from the government and other lending institutions. It is assumed that this special fund will infuse the much-needed liquidity, but will fail to meet the entire requirement.