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Affordable housing, logistics to get a boost from Sovereign Wealth Funds

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SWFs hold USD 29 billion of Assets Under Custody (AUC) as of December 2019

The measures announced recently within the Union Budget granting 100% tax exemption on interest, dividend and capital gains income to Sovereign Wealth Funds (SWFs) investing in infrastructure, will further help boost investments in affordable housing and logistics, says JLL Research. India seems to possess gained a serious impetus following some positive policy backing and therefore the ecosystem generally thus helping boost the image of the country as a favourite with SWFs.

Sovereign Wealth Funds are state-owned investment commonly established with revenues generated from trade surpluses, financial institution reserves, currency operations, privatisations and transfer payments. Between 2008 -18, global Assets Under Management (AUM) of SWFs grew at a CAGR of 10% with Asia garnering the very best share (42%).

“Sovereign wealth funds are playing a pivotal role in investments globally with estimated AUM of 8.1 trillion as of 2019. Investments by SWFs in India improved sharply as a results of various policy measures introduced to draw in foreign investments. The Union allow 2020 has further incentivized SWFs to take a position in infrastructure including affordable housing and warehousing by providing tax exemptions. the increase in potential returns is predicted to drive more SWF investments in India. SWFs would be more inclined to use the direct investment route as compared to investment platforms,” said Ramesh Nair, CEO and Country Head, JLL India.

India emerging because the favourite destination for SWFs

Investments by SWFs improved sharply as various policy measures were introduced to draw in foreign investments. In India, SWFs hold USD 29 billion of Assets Under Custody (AUC) as of December 2019. Of these, land and warehousing account for 22% of the AUC, amounting to USD 6.6 billion.

“SWF Investments quadrupled to USD 5.3 billion during 2014-19 from USD 1.3 billion recorded between 2005 and 2013, thanks to various reforms introduced within the land sector. Going forward we expect more traction from this sort of patient capital,’ said

Dr Samantak Das, Chief Economist and ED, JLL India.


Strong interest of SWFs in India

Source : National Securities Depository Limited, Securities and Exchange Board of India and JLL Research

The Union allow 2020 further incentivizes SWFs to take a position in infrastructure by providing them a 100% tax exemption on interest, dividend and capital gains income in respect of investment made in infrastructure and other notified sectors before 31st March, 2024 with a minimum lock-in period of three years.

The resultant increase in potential returns is predicted to spice up investments by SWFs in affordable housing and logistics & warehousing which are accorded infrastructure status.

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