The Economic Times of India reports Ivanhoé Cambridge, Mapletree form Rs 15,400-cr platform to invest in tech-led office properties in India:
Global real estate firm Ivanhoé Cambridge and Mapletree,
property development, investment capital and property management
company have formed a strategic partnership to develop, own and operate
technology-sector-focused workplaces in India.
The
new joint investment platform will have an investment capacity of over
Rs 15,403 crore (Canadian $ 2.5 billion). Both the partners have already
identified properties and projects to meet this investment target.
“We
are particularly pleased to find such great alignment with Mapletree
for India, on our values, ESG ambitions and their 15-year experience in
India. This partnership continues our growth plans for the APAC region,
bringing diversification to our portfolio and resilience to our
returns,” George Agethen, Co-Head Asia-Pacific, Ivanhoé Cambridge.
The investment strategy for the venture will focus on both stabilised,
and development of Grade A office assets in key economic hubs in India,
which are benefiting from the exponential growth in technology led
innovation activities anchored by global capability centres, as well as
large domestic and international technology services corporations.
“There
is a considerable synergy in this strategic partnership as it pools
together leading expertise across the real estate value chain from two
globally recognised firms. It will allow us to strengthen our presence
in India, and expand our portfolio in the commercial sector efficiently,
which we believe has good growth potential in the coming years,” Quek
Kwang Meng, Regional Chief Executive Officer, India, Mapletree.
Mapletree,
with its global track record in developing and managing high-quality
Grade A assets, will lead all real estate development, project
management, leasing, and operations.
Ivanhoé
Cambridge will bring in its expertise and experience as an
institutional investor in sectors and assets that are shaping the urban
fabric in a sustainable manner in the most dynamic cities, globally.
The
investment portfolio of the platform will meet industry benchmarks on
sustainability credentials, aligning with Ivanhoe Cambridge and
Mapletree’s commitments to achieve net zero operational carbon by 2040
and 2050, respectively.
This partnership allows both Ivanhoé
Cambridge and Mapletree to strengthen their exposure to India’s
knowledge, technology and innovation workplace sector, which is
supported by long-term fundamentals and a high-quality talent pool.
"Against
the backdrop of an ongoing policy overhaul, emerging opportunities in
organised commercial real estate space, enhanced transparency, and
sustained growth in demand for grade A commercial office space, the
investment momentum in the Indian real estate sector will continue to
rise,” said Gautam Saraf, MD-Mumbai, and new business, at Cushman &
Wakefield.
According to him, Ivanhoé Cambridge and Mapletree’s
partnership for investments indicates the appetite for Indian real
estate assets among global institutional investors continues to be
strong.
In addition to large and established domestic investors, global funds like Blackstone Group, Brookfield Asset Management, GIC, Xander, Ascendas, CPPIB, Warburg Pincus and Goldman Sachs are expanding their investments in the sector.
The
recovery in commercial real estate, especially office spaces, after the
Covid19 pandemic is getting broad-based, as indicated by the rising
number of small and midsize leases and outright transactions across
segments and key property markets.
The commercial office segment,
which was impacted significantly by the pandemic, has made a strong
comeback in the last 3–4 quarters, supported by strong economic growth,
increased hiring, and a return to the office trend, keeping the office
sector buoyant.
Razak Musah Baba of IPE Real Assets also reports Ivanhoé Cambridge and Mapletree to invest in tech hub workplaces in India:
Ivanhoé Cambridge and Mapletree have teamed up to invest over C$2.5bn (€1.7bn) in technology-sector-focused workplaces in India.
The pair said their newly launched investment partnership, which
intends to develop, own and operate the assets, has already identified
properties and projects.
The platform will focus on both stabilised, and development of
“high-quality Class A workplace assets in key economic hubs in India”.
Mapletree – the property investment arm of Singapore’s state
investment – will be in charge of development, project management,
leasing and operations.
The partnership allows both the Canadian investor and Mapletree to
“strengthen their exposure to India’s knowledge, technology and
innovation workplace sector, which is supported by long-term
fundamentals and a high-quality talent pool”, the companies said.
George Agethen, co-head of Asia-Pacific, Ivanhoé Cambridge, said: “We
are particularly pleased to find such great alignment with Mapletree
for India, on our values, ESG ambitions and their 15-year experience in
India.
“This partnership continues our growth plans for the APAC region,
bringing diversification to our portfolio and resilience to our
returns.”
Quek Kwang Meng, regional CEO, India, at Mapletree, said: “There is a
considerable synergy in this strategic partnership as it pools together
leading expertise across the real estate value chain from two globally
recognised firms.
“It will allow us to strengthen our presence in India, and expand our
portfolio in the commercial sector efficiently, which we believe has
good growth potential in the coming years.”
Ivanhoé Cambridge issued a press release stating that it has teamed up with Mapletree to launch India real estate investment platform dedicated to technology sector focused workplaces:
Singapore, February 10th, 2023 – Ivanhoé Cambridge, a global real estate firm, and Mapletree,
a leading global real estate development, investment capital and
property management company committed to sustainability announced a
strategic partnership to launch a new investment platform to develop,
own and operate technology-sector-focused workplaces in India with an
investment capacity of over CAD 2.5 billion (~SGD 2.5 billion1). Properties and projects have already been identified to meet these ambitions.
Mapletree,
with a strong global track record in developing and managing
high-quality Class A assets will lead all real estate development,
project management, leasing, and operations. Ivanhoé Cambridge will
bring its global expertise and experience as an institutional investor
in sectors and assets that are shaping the urban fabric in a sustainable
manner in the most dynamic cities, globally.
The
investment strategy for the venture will focus on both stabilised, and
development of high-quality Class A workplace assets in key economic
hubs in India, which are benefiting from the exponential growth in
technology led innovation activities anchored by global capability
centres, as well as large domestic and international technology services
corporations. The portfolio will meet industry benchmarks on
sustainability credentials, aligning with Ivanhoe Cambridge’s and
Mapletree’s commitments to achieve net zero operational carbon by 2040
and 2050, respectively. It is also targeting ambitious green
accreditations, such as WELL certification.
Speaking on the new venture, George Agethen, Co-Head Asia-Pacific, Ivanhoé Cambridge, said: “We
are particularly pleased to find such great alignment with Mapletree
for India, on our values, ESG ambitions and their 15-year experience in
India. This partnership continues our growth plans for the APAC region,
bringing diversification to our portfolio and resilience to our
returns.”
Mr Quek Kwang Meng, Regional Chief Executive Officer, India, Mapletree, said: “There
is a considerable synergy in this strategic partnership as it pools
together leading expertise across the real estate value chain from two
globally recognised firms. It will allow us to strengthen our presence
in India, and expand our portfolio in the commercial sector efficiently,
which we believe has good growth potential in the coming years.”
This
partnership allows both Ivanhoé Cambridge and Mapletree to strengthen
their exposure to India’s knowledge, technology and innovation workplace
sector, which is supported by long-term fundamentals and a high-quality
talent pool.
1 CAD 1=SGD 0.98 as at 20 January 2023
So Ivanhoe Cambridge is partnering up with Singapore's Mapletree to build out a
new joint investment platform will have an investment capacity of over
Rs 15,403 crore (Canadian $ 2.5 billion) to invest in tech-led office buildings in India.
Both the partners have already
identified properties and projects to meet this investment target.
Moreover, the investment portfolio of the platform will meet industry benchmarks on
sustainability credentials, aligning with Ivanhoe Cambridge and
Mapletree’s commitments to achieve net zero operational carbon by 2040
and 2050, respectively.
The investment strategy for the venture will focus on both stabilized, and development of Grade A office assets in key economic hubs in India, which are benefiting from the exponential growth in technology led innovation activities anchored by global capability centers, as well as large domestic and international technology services corporations.
There are a lot of reasons why India is a global technology hub, but I would focus on these four which Michael Megarit posted on his business blog:
India has long been recognized as a tech-savvy country.
Strong governmental support, a good English based education system, a
large talent pool and an open market made it the go-to destination for
Western outsourcing.
However, India has become much more than that: With an Information Technology (IT) sector employing more than 4.5 million people, it is now a full-fledged technology hub.
Obviously, this did not happen overnight. It is the result of explosive economic development and long-term political planning.
In February 2021, Harsh Cardhan, India’s Science and Technology Minister revealed the Government’s ambition of making the country “science and technology centric”.
Indeed, the Indian government has long identified these two sectors
as being key drivers of economic growth. So far, the efforts seem to be
paying off as India ranks third among the most attractive investment destinations for technology transactions in the world.
Accounting for 8%
of GDP, India’s IT and Business Process Management (BPM) sectors could
very well be the drivers of future socio-economic growth.
Here are 4 reasons why India is becoming a global leader in technological innovation.
1 – India’s Economy is Thriving
The Growing Middle Class is Driving Demand for Technology
India’s economic growth is nothing short of spectacular.
In just 20 years, the country’s GDP
has grown by more than 200%, reaching a peak of $2.9 trillion in 2019.
In comparison, the nation’s GDP was less than $880 billion in 2000.
The direct result of this economic expansion is the emergence of a thriving middle class. In fact, it is estimated
that India’s middle class will soon be proportionately as large as that
of the US’ today. Currently, nearly 55% of the country’s population is
middle class – and if growth continues, this number will rise to 80% by
2030. If these projections become reality, then India’s middle class
will be the largest in the world by 2025.
Naturally, India’s growing middle class is starting to dictate
consumption trends. Private consumption represents nearly 60% of the
country’s GDP and has accounted for 70% of all growth since 2000. By
2030, it will drive 75% of consumer spending.
India’s
middle class is eager to access technology and this is arguably the
single greatest factor driving technological advancements in the
country.
By 2030, one billion Indians will be using the internet and almost all of them will be using smartphones.
The World Economic Forum anticipates
that India will witness a 4x growth in consumer spending by 2030. In
particular, the WEF believes that digitally influenced consumption will
become the norm, with more than 40% of all purchases being digitally
influenced by 2030, up from 20% today.
ie, propensity for consumption, awareness and
tech-savviness will create massive opportunities The WEF’s study concluded that “India in 2030 will be a
playground for growth and innovation for consumer businesses — both
Indian and global, established and emerging. The transformations in the
Indian consumer’s incomnities”.
Since the middle class is demanding more technology products, R&D spending is increasing.
Research & Development Spending is Increasing
Gross Domestic Expenditure on R&D (GERD)
as a percentage of Gross Domestic Product (GDP) is the total amount of
capital spent on R&D during a specific period expressed as a
percentage of GDP of the national territory.
India’s gross expenditure in R&D has tripled between 2008 and 2018 and its GERD as a percentage of GDP stands at 0.65%.
While this figure is still below other BRIC countries (Brazil: 1.3%, Russia: 1.1%, China: 2.1% and South Africa: 0.8%), the situation has improved tremendously over the past 20 years:
Per capita R&D expenditure increased 60% from 2008-2018
Women participation in extramural R&D projects increased to 24% in 2017 from 13% in 2000
The number of researchers per million population increased to 255 in 2017 from 218 in 2015 and 110 in 2000.
India ranks 3rd in terms of the number of Ph. D’s awarded in Science and Engineering
India’s Patent Office stands at the 7th position among the top 10 patent filing offices in the world (source: WIPO).
Every objective metric points to a growing R&D industry.
As a result, the country’s IT sector is in full growth mode.
2 – India Boasts a Historically Dynamic IT Sector
India is a global IT leader
India is a well established leader in the world of IT:
In 2020, its IT market represents 8% of GDP.
IT spending is estimated to reach $98 billion in 2022.
The Indian IT market is expected to reach $100 billion by 2025.
Furthermore, Indian IT firms have delivery centers across the world
and are well diversified across verticals such as Banking Financial
services and Insurance (BFSI). Also, it is important to mention that
India remains a preferred destination for IT & BPM in the world and
remains a leader in the global sourcing industry, with a 52% market
share in services exports from the country.
India remains the most attractive outsourcing destination
In fact, a recent survey
showed that 80% of European and US outsourcing firms ranked India as
their number one sourcing destination. Further, the National Association
of Software & Service Companies (NASSCOM), reported that nearly 50%
of all Fortune 500 companies choose to outsource software development
to Indian outsourcing firms. Overall, India’s outsourcing industry is
experiencing an incredible growth rate of 25-30% per year.
Technological innovation also comes from the pharmaceutical sector.
Indeed, Big Pharma invests billions every year to develop cutting
edge technology. In this regard, India is also performing incredibly
well.
India ranks 3rd worldwide for pharmaceutical production by volume and ranks 14th
for pharmaceutical production by value. It is the largest provider of
generic drugs globally and supplies 50% of the global demand for various
vaccines. Further, India’s domestic market is estimated to be worth $42
billion in 2021 and is expected to reach $65 billion by 2024 and
$120-130 billion by 2030.
The country’s biotech industry, which comprises biopharmaceuticals,
bio-services, bio-agriculture, bio-industry ad bioinformatics, is valued
at $64 billion in 2019 and is expected to reach $150 billion by 2025.
The low cost of production and R&D boosts the efficiency of
Indian companies, which leads to competitive exports. In FY2021, Indian
pharmaceutical exports reached nearly $25 billion.
In sum, pharma spending in India is projected to grow 9-12% over the
next five years, which will make the country one of the top 10 countries
in terms of medicine spending.
This means more R&D spending, which will further boost technological innovation.
A Booming Scientific Research Field
India’s booming R&D sector is made possible by the Country’s active research community.
India ranks third
globally for the number of peer-reviewed Science and Engineering
Publications. In 2019, India published 135,788 articles, a 177% increase
from 2008. In fact, India represents more than 5% of the total world
publications in science and engineering. Only China and the US do
better.
In recent years, there is an acceleration of advanced research and development in India. We can cite a few examples:
Motorola’s two R&D facilities which helped produce a sub-$40 cell phone.
Microsoft’s launch of its 3rd international R&D center in India.
Intel has 800 India-based engineers working on software and hardware designs for its communication and semiconductor lines.
Other US companies are operating in Bangalore, India’s Silicon Valley.
In total, more than 150 international companies are doing R&D in
India, and this is just the beginning of the movement that will make
India an international R&D powerhouse.
While India’s R&D expenditures as a percentage of GDP are still lagging behind other emerging economies, the country has made significant progress over the past 20 years.
How can we explain the rapid expansion of the IT sector and flurry of
R&D activity? The answer is actually quite simple: well-targeted
political efforts.
3 – A Political Agenda Centered on Promoting Innovation
Technological innovation in India is mainly driven by political support.
Intellectual Property and Technology Transfers
In 2020, the Indian Institutes of Information Technology Laws (Amendment) Bill declared
that five IT institutions established under Public-Private Partnership
mode, as well as fifteen other such institutes, are now considered
institutions of national importance. These institutes now have the power
to grant degrees to their students.
In parallel, the Indian government is implementing legislation
to push IP protection and encourage tech transfer. Strong and
comprehensive patent protection encourages foreign firms to transfer
tech and ultimately increases foreign direct investment and R&D
spending.
Indian lawmakers are implementing schemes, policies and regulations
to encourage innovation and facilitate knowledge sharing. For example,
it declared 2010-2020 as the decade of innovation and adopted important
incentives such as the Make in India and Start-up India policies.
There is a demonstrated correlation between patent grants and an increase in innovation.
Shri Piyush, who was minister of Commerce and Industry between 2014 and 2018, claims that patent examination increased significantly in recent years:
Patents granted went up to 28,391 in 2021 from 6,326 in 2015.
Trade Marks registration shot up to 255,993 in 2021 from 65,045 in 2015
Copyrights granted rose to 16,402 in 2021 from 4,505 in 2015.
Shri Piyush claims that patent examinations increased over the past decade.
This illustrates the government’s efforts to enhance the innovation
ecosystem, provide a favorable environment for startups and increase
foreign confidence in India’s investment environment.
As a result, India’s ranking in the Global Innovation Index improved: the country climbed 33 places from 81st position in 2015 to 48th position in 2020.
In addition to implementing positive IP legislation, the government
of India is enacting various production linked schemes to increase
industrial technological output.
The scheme, which is worth $10 billion, is expected to boost local
hardware manufacturing and attract significant foreign investment as the
country’s local ecosystem becomes more sophisticated.
As of July 1st,
2021, the Indian government announced that 14 companies, including
Dell, lava, Dixon, Wistron and Foxcon have all been approved as
beneficiaries under the scheme.
The government believes that over the next 4 years, these companies
will fuel a total production worth more than $15 billion and generate
direct employment opportunities for over 36K people.
In addition to these efforts, local governments are also enacting legislation to attract investments.
For example, the 6 key states involved in IT are enacting ambitious incentives, which are driving phenomenal economic growth:
Andhra Pradesh is home to over 20% of India’s IT
manufacturers. The India Business Process Outsourcing Scheme helped
create 12,234 new jobs and is facilitating the expansion of IT and BPO
companies in Tier-2 and Tier-3 cities across India.
Karnataka is the country’s 4th largest
technology cluster, which includes over 3,500 companies that contribute
over $32 billion in exports. Its various schemes encourage foreign
investments and the region is expected to become the largest IT cluster
globally.
Maharashtra. Since 2016, the state
government has helped fund the development of 37 IT parks and approved
472 others. Further, the state’s industrial policy offers incentives for
investments made in various infrastructure projects, such as new
knowledge parks. From 2017-2020, the state’s policies attracted over
$800 million of IT-related investments and the revenues earned from the
industry’s total exports rose to nearly $130 billion, from $118 billion
in 2014.
New Delhi is another IT-friendly district, with
state officials enacting various incentives, such as Special Economic
Zones (SEZs), which have attracted a host of multinational IT hardware
companies, such as Barco, Samsung, and Toshiba.
Tamil Nadu is a region which employs more than 400K
IT professionals. The state government offers capital subsidies to
invite investments and the region contributes over 10% of the country’s
total IT exports.
Telengana boasts over 1,500 IT
companies which contribute 10% of the country’s total IT exports. Much
like Tamil Nadu, Telengana offers a number of incentives for businesses
to invest and employ talent.
In 2020, the Software Technology Park of India (STPI) announced
a plan to open 21 Centers of Excellence (CoE) to promote emerging
technologies. Over the past few years, several CoEs specializing in AI
were established to help the country facilitate R&D for business and
society.
We can cite the opening of the following CoEs in 2020:
Accenture opened
a 300,000 square feet innovation hub in Hyderabad with more than 2,000
professionals with expertise in AI, security, extended reality,
automation, and Blockchain. The hub will also hose a Nano Lab that
offers clients a window into the latest breakthroughs in AI, AR, IoT and
Blockchain technology.
Tech Mahindra, an Indian tech giant, announced
the launch of a dedicated Google Cloud CoE to drive the digital
transformation of enterprises globally. The hub will help businesses
accelerate their migration to cloud.
IBM inaugurated
its Automation Innovation Center in Pune that is specialized on
Intelligent Automation and the Future of Work. The facility will house
work on industry vertical solutions in banking, insurance, retail, CPG,
telcos, healthcare, etc.
Offices of Tech Mahindra, an information technology
company belonging to the Mahindra group, in Hyderabad, Telangana state,
India. It is a $4.5 billion company with offices in 90 countries.
Finally, it’s important to mention the New Millenium Indian Technology Leadership Initiative (NMITLI).
This is the largest public-private-partnership effort within the
R&D domain in India. It looks beyond today’s technology and aims to
build, capture and retain a leadership position by synergizing the best
competencies of publicly funded R&D institutions, academia and
private industry.
Basically, the government will consciously and deliberately identify,
select and support potential winners in order to catalyze innovation
centered scientific and technological developments. Ultimately, the goal
is to transform India into a global R&D leader.
The Emergence of Private Equity
The last factor driving technological innovation in India is the rise of Private Equity over the past decade.
From 2011-2020, the Private Equity/Venture Capital (PE/VC) industry
grew from a relatively insignificant, alternative asset class to a
mature ecosystem totaling more than $230 billion. In fact, it grew at a
CAGR of 19% from 2010 to 2020 and now affects all investment classes and
strategies.
As in the rest of the world, the COVID-19 pandemic led to the
adoption of technology across companies and governments, which brings
into focus the need for investments in such sectors as edtech,
healthcare, pharmaceuticals, technology, and e-commerce. These sectors
are expected to be among the most popular receiving investments in the
coming decade.
In fact, large corporations acquiring start-ups to increase their
e-commerce and technology capabilities will be the man driver of PC/VC
exists in the coming decade. Reliance Group’s recent acquisition of
Netmeds, an online pharmacy platform and Tata Group’s $1.2 billion
acquisition of Bigbasket are indicative of this emerging trend.
CONCLUSION
In conclusion, the data reveals that India is one of the countries attracting the most technology investments in the world.
Impressive economic growth, strong political will and private
investments have transformed the nation into a high-skilled
technological hub.
However, for the time being, much of this technological activity is driven by foreign companies.
Will India’s rise to the top of the tech innovation lead to the emergence of its own transnational FAANG companies?
About the Author
Michael Megarit is a partner with Cebron Group. With over 25 years of domestic and international corporate finance experience, he provides M&A and capital advisory to high-growth technology companies.
Clearly there are secular factors driving the demand for India's tech-led commercial real estate.
There will also be more than few bumps along the way.
As rates rise all over the world, India will feel the pain:
But Ivanhoe Cambridge and Mapletree are looking at the long term fundamentals here and they remain solid.
Below, an interesting panel discussion from Carnegie India on India's Digital Way: The Road to G20.
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