Risk Assessment Framework for Real Estate Fund Management in India

Abstract

The importance of risk assessment and its management assumes priority over the normal return chasing behaviour by the investors. In the domain of real estate, the focus of investment research has been on various aspects related to direct investment and listed investment vehicles like Real Estate Investment Trusts (REITs). The present study identifies the key risks for NREFs and proposes a risk assessment framework for the real estate fund management sector in an emerging economy like India. The study has been divided into three parts. First part covers the introduction to global and Indian real estate and NREFs, literature review and overview of research methods used for the analysis. Second part includes the data analysis and last part includes the proposed risk assessment framework and the conclusions of the study. Overall, the study contributes towards the limited academic body of literature in understanding the risks in NREFs. Firstly, it summarises a large number of risk attributes to identify five principal risk factors. Secondly, it provides diagnostic measures to the risk by providing ranking and weightages to risk factors and sub-factors. Thirdly, it simultaneously identifies the macroeconomic determinants of domestic and foreign investment in real estate. Lastly, the proposed risk framework demonstrates the dynamic nature of risk across the three lifecycle stages investment, monitoring and exit stage. The study had limitations of limited time series data related to real estate and the absence of performance data of NREFs in India. The future research can expand the proposed generic risk assessment framework to specific requirements by the class of investors, for specific asset classes and on the basis of the investment style. This research sets a positive context to the future management of the risks in NREFs in India, and potentially for other emerging real estate markets using non-listed real estate vehicles. newline newline newline