Private equity investments in the real estate sector increased by 26 per cent during 2016 and touched a nine-year high of nearly Rs 40,000 crore, according to property consultant Cushman & Wakefield. Mumbai saw the highest share of inflow at 32 per cent of the total private equity investments in real estate (PERE). “PERE inflows in 2016 were seen at their highest in nine years at Rs 399 billion (USD 5.97 billion), registering a 26 per cent increase from Rs 316.7 billion (USD 4.8 billion) in 2015,” the consultant said in a statement. The number of deals closed during the year also rose only 5 per cent with 119 deals. Average deal size increased to Rs 3.4 billion (USD 50 million) from Rs 2.8 billion (USD 43 million) 2015, signalling increased confidence amongst investors to make larger investments into the Indian real estate sector.
Residential assets remained the most preferred asset class with over 52 per cent of (Rs 208 billion/USD 3.1 billion) of the total PERE witnessed in this asset class during the year. Private equity inflows into the housing sector rose by only 5 per cent during 2016. Domestic funds were most active investors in housing and accounted for almost 80 per cent of the total investments.
Investments in commercial office assets were Rs 57 billion (USD 0.85 billion), lower than that of last year, as a few large deals for office portfolios initiated in 2016 are still in active discussion and likely to close this year.
“The year 2016 was one of the best years for the organised retail real estate sector, with the sector attracting Rs 72 billion (USD 1.07 billion) of PE investments.
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PE inflows into malls rose more than seven-fold in 2016 from 2015 levels on account of rising interest from institutional investors and funds looking to invest in top- grade leased malls with low vacancy levels.
“The recent efforts by the government to regulate the sector has been viewed favourably by investors who are now looking at the long term potential of the Indian market,” Cushman & Wakefield India MD Anshul Jain said.
The commercial office sector has been witnessing sustained high demand and investors are enthused by the opportunity in this space, led by impending REITs, he added.
Despite global economic concerns, lower GDP growth projection due to demonetisation and slower revenue growth forecasted in the IT-BPM sector, the consultant said that the office sector is seeing stable growth with adequate pre- commitments in key markets such as Bengaluru and Hyderabad.
“Aside of the commercial office sector, we will also saw a keen investors’ appetite for retail assets increasing over the next few years as it has remained uncharted for a long period of time,” Jain said.