In this interview, Sahil Shah, Director at Certus Capital spoke about the company’s innovative approach to real estate investing and about the advantages of investing in REITs, RE credit options, and fractional RE investments as alternatives to traditional ownership.
Read the complete interview:
TechGraph: How do you mitigate risks associated with real estate investing?
Sahil Shah: The key risks associated with real estate credit investments (primary focus for Earnnest) include Credit/Counterparty risk, market risk, execution/approval risk, and exit risks.
These risks are addressed through a combination of in:
- Thorough pre-investment diligence which includes technical (approvals, cost, schedule, etc.), market (price and absorption speed), valuation, legal (title and litigation), CIBIL and financial conducted by third-party specialty agencies in addition to extensive internal checks,
- Robust control mechanisms – cash flow control through escrow mechanism, NOC-based sales
- Regular post-investment monitoring by our team supported by specialist third-party agencies (technical and financial)
TechGraph: Can you discuss your track record of successful real estate investments and the strategies you employed to achieve those successes?
Sahil Shah: We have closed transactions of Rs 190 crores of which Rs 112.5 crores is already invested since inception in Jan 2022. Up to March 2023, investors on the platform have received 15.6% back (as interest and principal pre-payments) i.e. an investor who invested Rs 100 across the closed deals on Earnnest have received Rs 15.6 back by March 2023.
In addition to these deals, we have also advised on sales of Rs 8,400 crores involving marquee global investors and high-quality developers. Further, the Certus team has an extensive RE credit investing experience of Rs 4,570 crores (between 2104 and 2018) in prior jobs.
TechGraph: What types of real estate assets do you focus on and why?
Sahil Shah: We look at opportunities across real estate asset classes – Residential, Office, Hospitality, Industrial & Data Centers, and Retail.
Currently, we like residential credit and hospitality the most. Across both these themes the physical market is doing quite well though capital is in short supply leading to opportunities offering an attractive risk-reward.
TechGraph: How do you stay up-to-date on real estate market changes and trends?
Sahil Shah: At Certus, we are highly data-driven. Over the past 5 years, we have looked through credit portfolios of more than Rs 40,000 crores across our advisory and Earnnest verticals.
This and our continued presence in the market give us tremendous insight into current trends and what is working and what is not. This along with market research – internal and published by various RE focussed firms and brokerages goes into identifying key themes we would like to pursue.
TechGraph: What advice would you give to someone interested in investing in real estate for the first time?
Sahil Shah: Real Estate should form part of every investment portfolio and one should allocate to real estate. Having said that we believe, physical real estate should be looked at as a consumption item and not an investment eg. A house is to live.
For investments, investors should evaluate various financial options (several are now available) which have underlying real estate sector exposure eg. Office REITs, Retail REITs, RE credit options such as Earnnest, fractional RE investments, etc.
These offer several benefits over owning physical RE – Low ticket sizes, a possibility for diversification within the RE exposure, professional management, low transaction costs, and higher liquidity (in some cases).
TechGraph: What sets Certus Capital’s approach to real estate investing apart from other firms in the industry?
Sahil Shah: At Certus, the key areas we like to focus on are investing in high-conviction themes and trends backed by research and data.
Best opportunities are seldom available in the most popular or trending ideas. We also do thorough diligence and focus on risk management along with an emphasis on post-deal monitoring and controls.
TechGraph: How do you balance long-term growth objectives with short-term cash flow needs in your real estate investment strategy?
Sahil Shah: Regular cash flow is a very important part of total returns across most real estate strategies/investments. Given our current focus on RE credit, we are highly focussed on investments that offer regular cash flow.
TechGraph: Can you discuss any current or upcoming real estate investment opportunities Certus Capital is considering?
Sahil Shah: We continuously offer opportunities through our platform Earnnest. Also, during the year, we will launch a credit focussed alternative investment fund with a target raise of Rs 500 to Rs 1,000 crores.