On Episode 1017 of The Core Report, financial journalist Govindraj Ethiraj talks to Chanakya Chakravarti, Global Real Estate Investor and Capital Strategist.

SHOW NOTES

(00:00) Stories of the Day

(00:50) More World Leaders Join The Hunt For Gasoline

(04:34) Neoclouds Are Under Pressure On Wall Street, Opening Up Fresh Chink In AI Armour

(05:53) Uday Kotak’s Warning On The Cost Of FCNR Deposits

(07:24) Domestic Institutional Capital In Real Estate Has Overtaken Foreign Capital For The First Time. What Does That Mean?

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NOTE: This transcript contains the host's monologue and includes interview transcripts by a machine. Human eyes have gone through the script but there might still be errors in some of the text, so please refer to the audio in case you need to clarify any part. If you want to get in touch regarding any feedback, you can drop us a message on feedback@thecore.in.

Good morning, it's Tuesday, the 27th of October and this is Govindraj Ethiraj, broadcasting and streaming weekdays from Mumbai, India's financial capital.

The top stories and themes for today…

More world leaders are joining the hunt for gasoline.

Neo clouds are under pressure on Wall Street, opening up a fresh chink in the AI armour.

Domestic institutional capital in real estate has overtaken foreign capital for the first time, what does that mean?

And Uday Kotak's warning on the cost of FCNR deposits.

Markets, Oil, Gold and Neoclouds

It does appear that everyone including those tasked by US President Donald Trump are racing around the world to find gasoline or diesel. After US Secretary of State Marco Rubio visited Mumbai and Jamnagar in search of diesel for now and in future, Indonesia's energy minister said yesterday he will travel abroad starting from this week including to China and India in a bid to secure more gasoline supplies.

We cannot predict how long the tension in the Middle East will go on for, so President Prabhobo has instructed us to find other alternatives for energy supply, Reuters quoted him saying. Meanwhile, oil prices fell slightly on Monday after jumping last week but are still near six-month highs. Hopes were higher on Monday of hostilities between the United States and Iran, easing off though attacks on Saudi Arabia continued.

Top security officials from Saudi Arabia, Pakistan and Turkey were to meet with leaders on Monday in an effort to defuse tensions. Brent crude futures were down by about $1.90 on Monday morning to about $114.80, so just under $115 a barrel. Meanwhile, Saudi Arabia has said that it plans to store crude oil at Singapore's Jurong Rock Caverns from the second half of 2027 to strengthen supply security in the region.

Reuters quoted energy ministers from both countries saying on Monday, the war has obviously raised concerns about stockpile levels globally, including in India, and Asia imported about two-thirds of its oil supplies from the Middle East before the war. Saudi Arabia's energy minister said in a video recording at the conference that bringing supply closer to key Asian markets would strengthen the flexibility of their supply network and support Singapore's security of supply and preparedness. The rock caverns at Jurong Island can store up to 1.47 million cubic metres or roughly 9 million barrels of liquid hydrocarbons like crude oil and condensate and are located at a depth of 150 metres below the ground.

Saudi Aramco currently stores crude in Japan and South Korea, where local governments have priority to buy the supplies in the tanks in the event of an unexpected shortage, the Reuters report said. With all of this in the backdrop, the Indian markets broke a four-session falling streak on Monday, thanks also to positive earnings momentum. The benchmark indices were positive with the Sensex ending 482 points higher at 73,606 and the Nifty 50 ending the session 153 points higher at 22,753.

The markets were choppy on Monday and the broader market indices too reflected that sentiment with the Nifty mid-cap 100 finally ending 1.2% higher and the Nifty small cap ending about 1.4% higher. Shares of Infosys fell about 3% on Monday after it cut its fiscal 2027 revenue growth forecast, highlighting challenges from AI-driven pricing pressure, tougher competition, and sluggish demand in key markets. Now Infosys was the last of the top five to report earnings.

Earlier, TCS and HCL Tech met street top-line estimates and investors cheered the uptick in AI revenue. So the top-line estimates were not much to cheer about but the AI revenue composition was. Infosys had cut its fiscal 2027 revenue growth forecast to 1-2%, from 1.5-3%. Meanwhile, the rupee declined for the third consecutive trading session on Monday as importers stepped up dollar purchases, a Reuters report said, adding that the rupee opened little changed against the US dollar but then closed down at Rs.

95.18, down slightly for the day, and has now fallen about 0.8% in three sessions. Meanwhile, gold was back up above $4,000 on thanks to slightly easing oil prices, which also eased some inflation concerns. Spot gold was up 0.4% to $4,012 per ounce on Monday afternoon.

On Wall Street, stock prices of major neocloud stocks fell on Monday after Elon Musk said that more than 200 companies in the sector could collapse. A neocloud is a specialised cloud computing provider built primarily around graphics processing units and high-performance infrastructure to train and run artificial intelligence workloads. CNBC reported that Nebios Core, Weave, and Iron all dropped more than 4% in early pre-market trading on Monday, though they did recover to some extent, adding pressure to a sector already facing investor concerns about debt-fuelled expansion and whether the large AI infrastructure build-out will generate returns.

Elon Musk, also CEO of SpaceX and Tesla, said on a post on X on Sunday that as of the past few weeks, debt markets have almost entirely shut off access to money for any company that does not have substantial revenue independent of AI data centres. That means, he said, that the 200-plus neoclouds are going to see guppy-level death and consolidation. Some will make it through, but not many.

Back home with a rising clamour for relief on long-term capital gains tax, particularly for foreign portfolio investors, the right noises have also begun emanating from the government via various media reports that they may look upon these pleas kindly. Nothing, of course, has happened as yet and it would be best to wait till something happens and see what form and shape that dish is served if it is.

Uday Kotak’s Warning On The Cost Of FCNR Deposits

Uday Kotak, founder and non-executive director of Kotak Mahindra Bank, on Monday wrongly praised the Reserve Bank of India, saying the recent Foreign Currency Non-Resident Bank, or FCNRB, scheme was a strong insurance policy for India amidst global macroeconomic and geopolitical uncertainty.

He then cautioned that the country must prepare for the eventual repayment of the foreign currency deposits raised under the scheme. He was speaking at the Business Standard BFSI Insights Summit 2026 in Mumbai, where he said the government and the Reserve Bank had taken the right decision to build foreign currency reserves at a critical juncture. He said that what India's policymakers between the Reserve Bank and the government did was the right thing in the context of the global macroeconomic and geopolitical situation, with the world facing the Middle East conflict on top of the Russia-Ukraine conflict, and he said the FCNRB scheme was a strong insurance policy, and then added that the deposits would eventually mature, requiring the country to prepare for the repayment.

And here comes the interesting part. He estimated that India would have to repay more than the $130 billion raised under the scheme, along with interest, taking the total repayment obligation to around $160 to $170 billion. That's about $30 to $40 billion more than what was raised.

He also added that we need not panic about this today, but we must be strategic about it. We need to build India's economic and financial structure for that time, which will inevitably come.

Domestic Institutional Capital In Real Estate Has Overtaken Foreign Capital

Domestic investors now lead institutional real estate investment in India, and stronger local capital pools are reducing reliance on foreign investors and improving market resilience.

A recent column by Chanakya Chakravarti, a global real estate investor and capital strategist who has worked with large real estate funds including JP Morgan, has argued in Money Control. In the first half of 2026, he says domestic investors accounted for a record 64% of India's $4.3 billion institutional real estate investments, overtaking foreign capital for the first time. More significantly, domestic investments grew 165% year-on-year to about $2.8 billion even as foreign inflows declined about 37%.

While part of this reflects elevated global interest rates and higher hedging costs, the shift is underpinned by deeper structural changes, he said. I reached out to Chakravarti and I asked him what was driving this shift of capital and what were the trends that lay behind these numbers.

INTERVIEW TRANSCRIPT

Chanakya Chakravarti: In the last decade, what we saw was foreign capital coming into India and creating product, the likes of Blackstone and Brookfield and Temasek and GIC and the others. And this was all long duration capital creating large capital intensive assets like business parks and retail shopping centres and warehousing and logistics parks, etc. I think what the trend has now changed to where a lot of these global heavyweight sponsors are looking to monetise their investments.

And this is particularly true post-COVID in India. And I think one of the trends that I have observed and we've generally observed in the industry is that domestic capital is looking at taking on some of these assets that have been created. We now have six listed real estate REITs and a number of infrastructure INVITs.

And I think one of the trends that we have observed is that domestic capital is looking for income yielding assets with a growth element to it. So, where you have years of between six and a half to seven and a half percent current yields, and then you overlay that with another seven percent of growth, let's say, and you have a total return profile of about between 13 to 14 percent on a levered basis. And I think that's become quite interesting for domestic institutional investors, domestic family office capital.

And I think as the world has gotten more and more unstable because of the various challenges that we all know about in Europe and lately in West Asia, a lot of domestic capital is looking at these opportunities at home. And I think that's not a moment too soon and very welcome. And I think there is an acknowledgement that office as a asset class operates somewhat differently to developed markets, which kind of suffered in developed markets post-COVID.

But in India, in fact, the trend has been exactly the reverse, where the proliferation of GCCs being operated by 50 to fortune thousand now companies means that there is a underlying underpinning to the whole portfolio in each of these REITs and private portfolios of very high quality, high credit tenants who are committing to multi-year leases, which form a sustainable income stream, just like you would, you know, if you had to draw an analogy to a infrastructure concession, somewhat like that.

And so that kind of becomes very interesting. And then you overlay that with contractual rent escalations every three or five years, depending on what's been negotiated. It becomes an institutional grade income stream.

And we've seen evidence of that coming to the fore where, you know, someone like a large global investor was recently able to offload nearly a quarter of their entire holding in a commercial office REIT and was able to monetise over 12,000 crores in a single trade. And I think that is the fundamental difference. And all of that, I dare say, was picked up by domestic investors.

And I think that's the trend that we're observing. We are therefore, you know, I would say this is not a flash in the pan. It is a sustainable trend that we are likely to observe over the next rest of the decade.

Govindraj Ethiraj: Right. So you're also saying that we are beginning to and likely to see considerable outflow of the investments that had come in in the last decade, like it's happened in other forms of investment.

Chanakya Chakravarti: No, the trend in real estate, I would argue, is somewhat circular within the country. So a lot of these global investors that I referred to are actually recycling capital and redeploying capital into higher yielding assets. So let's take a Blackstone or a Brookfield, for example.

So if they are monetising in office, they are redeploying in digital infrastructure, they are redeploying in logistics. And so this is not money going out of the country. In fact, they are redeploying in the country in other asset classes or doubling down on existing positions that they've already taken because they feel, you know, for example, digital infrastructure, DC's data centres is a major thrust area for all of these global investors, either directly, like the names I mentioned, or, you know, the limited partners or the sovereign wealth funds or pension plans who are deploying indirectly into these close ended funds that are redeploying in higher and better yielding assets within the country.

Govindraj Ethiraj: Right. And when you talk about domestic capital flowing in, are you saying is this because people are readjusting because of where the stock markets are? Or is this a overall evolution?

Chanakya Chakravarti: I think it's a combination of both. I would say there is a tendency to come closer to home as the global markets get choppier. I think Indian real estate over the last decade, I would argue, has formalised quite substantially and dramatically, especially since the introduction of the Real Estate Regulation Act back in 2016.

And then a number of structural disruptions that we are all aware of, first starting with the collapse of ILNFS and then demonetisation, or maybe I've got the order wrong. And then there was COVID. And all of that meant that it force exited a lot of, you know, non-institutional sponsors from the market.

So the quality of operators has improved quite substantially. I would add that they are much better capitalised. And, you know, that allows global and domestic investors to now think beyond the single asset and think platforms, think platforms that they can co-own or own in a supermajority position, control behaviour, control governance, and make sure that business plans are adhered to, given, of course, the market supporting.

Govindraj Ethiraj: So when you say platforms, Chanakya, you mean funds and therefore large individual investors who can therefore direct the path of this fund?

Chanakya Chakravarti: So I'll give you an example. For example, take Horizon Industrial Parks, you know, which was Blackstone's endeavour in the logistics space, the warehousing space, that was first created in the private space with private capital from Blackstone's various funds. And then recently, if you recall, they listed it on the Indian Stock Exchange.

So that's one example. Or you take another example of Elevate Spaces, which is a platform that is into various kinds of education related spaces, either to live in or to have, you know, education workplaces in. And this, again, was a portfolio that was created with private capital, private equity capital, and then recently listed on the Indian Stock Exchange.

And of course, other six examples that I can give you are the six REITs that were created with private equity capital and then listed on the Stock Exchange. So these are some of the examples that I can give you.

Govindraj Ethiraj: Right. As you look ahead, particularly the next three to six months, how are you seeing flows in terms of opportunities for investors to invest in? And would it continue to remain largely a domain for high net worth individuals or ultra high net worth individuals?

Or do you see that's opening up a little more?

Chanakya Chakravarti: I would say that you're going to see very large transactions in the core plus and value add space, both from domestic investors as well as selectively from foreign investors. I say selectively from foreign investors only because they are now, you know, mostly all going all into digital infrastructure and that's helping that end. Domestic investors are doubling down or tripling down, I would say, on office as an asset class.

And, you know, I'll give you a couple of examples. You take the domestic funds, private equity funds that have been raised by Nuvama or Edelweiss, EAAA or 361 or ICICI Prudential. These are all domestic platforms.

The trend now that I observe and I think you will see over the next few months and maybe in the next couple of calendar years is that they are thus far being accumulating core and core plus assets, meaning rental generating assets. Now their investors are feeling a little bit more emboldened and they're saying, look, we like what we are seeing in terms of the return profile, but we want a little bit more. So as a result, they're going slightly up the risk spectrum by doing forward purchases, which allows them to, you know, retain some of the upside, but also de-risk the proposition by getting into forward contracts with experienced operators to create product and have a certain formula to accumulate these assets on completion and a certain level of leasing.

And I think this is the trend that we're going to see. There's a lot of capital waiting to get into organised, formalised rent yielding assets. I think the trend for the next two years, if I can make a prediction, I think you're going to see a lot of capital coming into digital infrastructure.

You're also going to see a lot of capital coming to warehousing and industrial logistics, light industrial logistics. And the third is, you know, office, which is already an established asset class because investors now feel confident that today, if they invest in some of these projects, they can be accumulated and put into a portfolio and listed into a REIT once it's, you know, has a certain critical mass.

Govindraj Ethiraj: Right. Chanakya, thank you so much for joining me.

Chanakya Chakravarti: Thank you.